- Following a very dovish June press conference, ECB President Draghi hinted at today’s Sintra speech at new easing measures.
- Draghi has made clear that additional stimulus measures – potentially including all instruments – would be necessary unless the outlook improves.
- Other ECB speakers have made rather clear this week that the recent collapse in inflation breakevens is seen as intolerable.
- We now expect further ECB monetary policy action in September, if not earlier.
- The size of the easing package is uncertain, and may depend on exogenous factors (trade tensions, Brexit, Italy). Given the risks associated to the de-anchoring of inflation expectations, a light-hearted approach is unlikely.
- Below we discuss and rank the available easing tools.