Will ECB follow the Fed in cutting rates this week?Posted on Monday, March 9 2020 at 7:59 am GMT+0000
The Coronavirus outbreak is expected to continue to be the main theme in the markets, as the number of virus cases outside of China are accelerating fast with no sign yet that the outbreak is close to peaking. Last week the United States, France, Italy, Germany and the United Kingdom have all reported huge increases in the number of infections, and the Fed, RBA and BoC cut rates in an attempt to avert economic devastation. This week the ECB will be holding a policy meeting so will it follow its major counterparts in cutting rates? Well the ECB is faced with a difficult choice, as it has limited room for maneuver, with policy rates already at -50bp and an asset purchase program still running at EUR20bn per month. So most probably the ECB will not cut the deposit rate and opt for liquidity measures instead.
On the data front, this week will be relatively quiet, with the highlight being the UK Autumn Budget due for release on Wednesday. With the UK economy slowing down, investors will scrutinize how expansionary this budget is. A budget that includes a big boost to public spending might fuel expectations that the Bank of England (BoE) may not have to cut rates aggressively to stimulate the economy by itself.
While in the US the main releases will be the CPI for February due on Wednesday as well and the PPI for the same month on Thursday.
In brief, the major data releases for this week:
– RBNZ Gov Orr Speaks (01:00 GMT)
– Chinese CPI (YoY) (01:30 GMT)
– UK GDP (MoM) (09:30 GMT)
– UK Manufacturing Production (MoM) (Jan) (09:30 GMT)
– UK Autumn Budget (11:30 GMT)
– US Core CPI (MoM) (Feb) (12:30 GMT)
– Crude Oil Inventories (14:30 GMT)
– US PPI (MoM) (Feb) (12:30 GMT)
– ECB Deposit Facility Rate (Mar) (12:45 GMT)
– ECB Marginal Lending Facility (12:45 GMT)
– ECB Monetary Policy Statement (12:45 GMT)
– ECB Interest Rate Decision (Mar) (12:45 GMT)
– ECB Press Conference (13:30 GMT)