ECB Appears To Be Focusing On Liquidity Measures
By Marc Chandler:
There has been some speculation in the markets over the past week or so that the ECB may begin reversing the April and July rate hikes as early as next month. The October 6 ECB meeting is Trichet's last before Draghi takes the reins.
Pricing from the OIS market suggest EONIA rates will remain low and this is achievable through either an ECB rate cut or continued safe haven inflows into the short-end in Europe. ECB member Mersh called the speculation over a 50 bp cut "wild",
according to news accounts. However, given the dismal flash PMI readings and its correlation with GDP, the market is aware that the ECB can indeed cut rates next week, even though Trichet did not use the "normal" word cues to suggest it.
On one hand, the ECB's critics argue that its bond purchases are blurring the distinction between monetary and fiscal policy. OnComplete Story »