Headline inflation gave a downward surprise and stayed at 0.1% y/y in November. The inflation rate for services in euro area fell to 1.1% in November in compare to 1.3% in previous month. Similarly, core inflation declined to 0.9% y/y during the same month against 1.1% in October. 

The major components of core inflation, non-energy industrial goods and service price inflation reduced to 0.5% y/y and 1.1% respectively.

"Apart from a dovish outlook we expect the ECB to expand the asset purchases, to extend them beyond September 2016 and to cut the deposit rate by 10 bp. We wouldn't exclude a more imaginative cut in the deposit rate resulting in a two-tier system with a headline-grabbing cut to -0.4% or -0.5%. That could be coupled with exemptions inspired by procedures in Denmark or Switzerland", says Nordea Bank.