Could surprise today.
Does it make more sense if you're going to do anything the next couple of months to cut rates today, because the signal will be taking everyone under the wrong foot.
There will be no move today, but i wouldn't completely rule out a rate cut.
I think what's crazy here is to step back and think about what would a rate cut mean for the real economy.
The answer is probably not all that much.
But at the same time, i think here it's important to think about what's been happening yesterday, both in terms of inflation and real activity.
Since we had the last e.c.b. meeting, the real activity data for the euro area has been better.
That's the key point.
Yes, it's moving on the lower side, but if we are moving forward and we are seeing that recovery gain some traction, in that case, i don't think the e.c.b. is going to feel the need to do something very aggressive.
And i think that's really where the key point is.
But the big question for the markets is, of course, if we were, and the risk scenario of deflation, what could be the e.c.b. do.
In that context, the debate on the sterilization becomes very, very important, because if we think about one of the key components of the treaty, it is that financing is not allowed, and that's one of the things that prevents q.e. from taking place.
If there is a assessment on that line, if they turn around and say it would be ok not to sterilize, then that starts to pave the way.
For all the details we still don't know about the o.m.t., one of the things that the e.c.b. did emphasize on o.m.t. was, again, this will be sterilized.
I think it's more a question of understanding what the e.c.b. could do in deflation.
There is a single needle in the compass.
They have a legal mandate, inflation.
They are not making that mandate.
There has got to be strong pressure, and that pressure has got to be growing for them to do something a little bit more aggressive.
We got a .7 read on the numbers, core and noncore, and we've got an emerging market crisis that is forcing down commodity prices.
You're going to end up in a situation fairly soon where we're not going to be printing numbers below that.
But i think we have to look at what is price stability, because i think when we look at what e.c.b. defines as price stability, remember when higher oil prices were pushing inflation well above 2 percent perks the e.c.b. didn't turn around and say let's hike rates now, which would have been a bad thing to do.
Of course, higher oil prices is not good for growth.
Lower oil prices are good for growth in the euro area, so i don't think the e.c.b. would turn around and say, look, because of lower oil prices, we need to pump more stimulus into the economy.
Now, price stability, to my mind, is looking at the inflation expectation, which still remain quite well anchored f. we look at the g.d.p. deflators, we're not seeing the same pressure.
If the recovery is coming through, i think the wide of widespread twhration is limited.
To me, twhration at the end of the day really links back to what's happening on the wage dynamics and people's ability to repay their debts through the income dynamics.
So it's about wages and employment and much less, to my mind, about the you're sandrow oil prices.
So i think the e.c.b. will have that focus as well.
If the recovery falters -- yes.
In that case, the question becomes what the e.c.b. can do.
And that's where today's opinion could be relevant for the future.
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