LONDON (Reuters) - RBC Capital Markets said on Thursday it now expected the European Central bank to keep its deposit rate on hold at -0.5% for the foreseeable future, having previously forecast further rate cuts this year.
The ECB cut its depo rate a week ago and money markets do not fully price in another 10 basis point cut until next April. The implications of the ECB’s rate tiering policy and open-ended asset purchases have prompted investors to reassess expectations for another rate cut. ECBWATCH
“We now expect the ECB to keep the deposit rate on hold (at -0.5%) for the foreseeable future, as our base case, compared to our previous call for a 20 bps cut in the September and December meetings,” RBC said in a note.
RBC said the ECB was now only like to cut rates again if the data deteriorated further and that the central bank gave the impression that it was trying to avoid placing unnecessary negative effects on banks’ profits.
Reporting by Dhara Ranasinghe; Editing by Tommy Wilkes