Forex Flash: Expecting a cut in ECB rates for May/June - RBS

FXstreet.com (Barcelona) - “We did not (and still do not) believe that a cut in the main refinancing rate will do much good, but the tone of commentary by members of the Governing Council since the last meeting has led us to change our call,” analysts Richard Barwell and Xinying Chen at RBS say, adding: “We now think the Council will cut the refi rate and although it is a close call, we think that cut comes in May; failing that it should arrive in June.”

“Last month we argued that the rate cut debate was on a knife edge, but stuck with our forecast for rates on hold on the basis that the outlook could improve, or the Council could fashion an effective non-standard tool,” they expand, noting: “We think that was the wrong call.”

“We are now expecting a cut in the main refinancing rate, largely in response to commentary by members of the Governing Council since the April meeting, which suggests to us that the ECB has reached the point where it has to do something,” Richard and Xinying conclude.