Nick Kounis, head of financial markets research at ABN AMRO, points out that ECB Vice President Luis De Guindos earlier this month talked up the ECB’s easing options.

“He said that ‘If necessary, we could cut interest rates further. We could increase the volumes in our asset purchase programme. We could further improve the conditions for our targeted longer-term refinancing operations, the TLTROs. We have definitely not exhausted all our options. We have scope to take further action, and we will take further action should it become necessary’.  However, he added two caveats. He said that the ‘negative side effects (of low interest rates) are becoming ever more pronounced’. In addition, he repeated the ECB’s call for fiscal easing, saying that ‘with interest rates very low for longer, fiscal policy would have a much bigger impact on the economy than would otherwise be the case. Although the ECB judged that recession risk was low, he noted that ‘the real threat at present is an extended phase of extremely low growth, below potential.’ At the same time ‘inflation expectations have recently shown a marked decline.’ Finally, he still judged that risks to the outlook were to the downside despite better news on Brexit and the trade conflict, though the risks were now ‘slightly less’. Overall, we do not expect further easing at the next ECB meeting, though we do think that the central bank will act again early next year as growth and inflation disappoint.”