ECB: Further easing not off the table, just delayed – Wells Fargo

Analyst at Wells Fargo changed their call for a 10 bps rate cut from the European Central Bank (ECB) from December to March 2020.

Key Quotes: 

“Some improvement in Eurozone data suggests the central bank will hold rates steady in December. The manufacturing PMI has been edging higher and GDP growth was a bit stronger than expected in Q3 (0.2% quarter-over-quarter vs. 0.1% expected), while core CPI inflation has started to turn upward in recent months, albeit gradually. We would emphasize that these positive surprises have been modest, and primarily a sign of stabilization in the Eurozone economy rather than an imminent acceleration. In that context, we are not ready to pull our call for an ECB rate cut entirely, but rather are of the view that the cut will be delayed.”

“Another reason we think the ECB will not cut rates in December is that policymakers have not sent clear enough signals that a rate cut is imminent.”

“We understand that the central bank may want to lend more time to allow this package of easing measures work its way through the economy. Accordingly, we are shifting our call for a 10 bps ECB rate cut to March 2020 from December.”