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ECB eyeing deposit rate cut?

Tuesday, November 10, 2015 - 01:36

Will it, won't it? As dovish rhetoric gets louder, ECB policy makers are said to be swinging behind a cut in the bank's deposit rate at their next meeting. But that could catch the markets unawares, according to a new poll. David Pollard reports.

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It's a rare day when French industrial growth is a cause for cheer in the euro zone. But a 0.4 per cent rise in Q3 is better for French growth. Rebounds in the Sentix economic sentiment and German trade figures also encouraging. But not, perhaps, encouraging enough. CEBR's Vicky Pryce. (SOUNDBITE) (English) VICKY PRYCE, CHIEF ECONOMIC ADVISER, CEBR, SAYING: "There are some very crucial elements of this current recovery which people perhaps tend to overlook, which is that in fact trade, world trade, is not growing anything like as fast as it should be growing at this time a global recovery. " It puts a cut in the ECB's deposit rate further into negative territory firmly on the table next month. That's according to policy-makers speaking to Reuters. It's seen as a simpler option than expanding or extending QE, and should push the euro down. Though a hike as many expect in the US next month could do that anyway. Most traders don't see an ECB cut happening, according to a new Reuters poll. IDEAGlobal forex strategist, Adrian Schmidt. (SOUNDBITE) (English) ADRIAN SCHMIDT, SENIOR POLICY ECONOMIST, IDEAGLOBAL, SAYING: "I would question the desirability of going for a rate cut in December when the Fed are probably going for a rate hike at the same time or in the same month. That could easily trigger a sharp euro-dollar move down, but it probably wouldn't last very long, and if you've used all your ammunition, you won't have anything to stop euro-dollar rebounding next year." Sweden, Denmark and Switzerland are also experimenting with negative rates. But they're relatively small central banks. The side effects of the ECB cutting deeper as yet unknown - and, some fear, could be unwanted.

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ECB eyeing deposit rate cut?

Tuesday, November 10, 2015 - 01:36