Deposit rate cut already priced in?
Reuters spoke with four anonymous ECB governing council members today and said a consensus is forming about taking deposit rates deeper into negative territory in December.
Draghi strongly hinted at December action in his latest press conference but was vague about how the ECB would deliver fresh stimulus. Today's story highlighted the deposit rate and said it could go further below the lower bound.
"Some argue that a deposit rate cut should even be larger than the 0.1 percent reduction currently expected in financial markets, the policymakers said," according to RTRS.
The euro initially slid on the headlines but deeper in the story there are signs that action may already be priced in or that other tools may not be used. The QE program is "a far more contentious issue that they have yet to agree on," the report says.
The deposit rate is currently at -0.20% and some policymakers argue a 0.10 cut won't be enough to impress markets. They said that two of the four officials argued for a bolder move.
"Let's go for a big cut," one Governing Council member, who asked not to be named, said.
"There is no bottom to the deposit rate in the near term, it could be lowered quite sharply still," he said. "There must be a bottom but it's further out."
The RTRS report cites the -0.75% deposit rates in Switzerland and Denmark.
They also report that the ECB is working through 20 different action proposals with most relating to asset purchases.
