Meet the One Economist Who Got ECB's Easing Mix Right (Mostly)

Will ECB Policy-Easing Measures Stimulate Economy?
  • Ducrozet lone among 60 to forecast four ECB components
  • Pictet's forecast fell short by not predicting refi rate cut

Only one among the 60 economists quizzed by Bloomberg ahead of the Thursday meeting of the European Central Bank got it right. Or almost.

Frederik Ducrozet, senior economist for Europe at Pictet Wealth Management in Geneva, forecast four components of the easing cocktail presented by ECB President Mario Draghi. Ducrozet fell short by predicting the ECB would leave the main refinancing rate unchanged, when in fact it cut the refi.

Ducrozet said the euro-area central bank would cut the deposit rate by 10 basis points, increase quantitative easing purchases by 20 billion euros ($22.4 billion) a month, include corporate bonds in QE purchases and add new TLTRO operations with looser terms. All those elements were included in measures announced by Draghi on Thursday.

“I called for another package immediately after the December meeting and my degree of conviction only got stronger after the Jan. 21 press conference,” Ducrozet said in an interview after the ECB announcement.

He said one of the key parameters he used was the loss of momentum in core inflation.

“The rationale for a big package did not rely on current economic and financial conditions, which remain decent overall, but on the risks implied to the outlook, including in terms of inflation expectations,” he said.

He only fell short in predicting that the ECB would leave the main refinancing rate unchanged.

“I didn’t predict a refi rate cut, or a negative rate on TLTROs, though the result is very similar to what I was hoping for,” Ducrozet said. “The new measures will reduce the cost of negative rates, especially for peripheral banks, while creating new incentives for them to lend.”

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