ECB likely to lower depo rate in March, may announce technical changes to QE design

ECB President Draghi, during his speech at the European Parliament's Economic and Monetary Affairs Committee, reiterated that the central bank will "review and possibly reconsider" its monetary policy stance during the March meeting. Draghi acknowledged the fall in market sentiment since December because of increasing worries regarding economic growth in emerging markets and declining oil and commodity prices.

Draghi highlighted that the weakening of the global economic environment will need contributions from all policy areas and that the central bank will "do its part" to help current recovery continue that is progressing at a modest pace. The financial market volatility might likely accelerate the downturn of business cycle and add downside risk to the growth prospect of 2016-2017.

However, the ECB president also downplayed recent concerns regarding the banking sector of Europe and highlighted that the sector is much more resilient than in 2012 due to better capital positions and the help from the central bank' monetary policy.

Draghi's speech does not change the likelihood that the central bank might lower the depo rate by additional 10bps in March and announce certain technical changes to the QE design by March. However, the central bank is unlikely to make any announcement regarding material QE changes.

However, Draghi has once again urged for other policy measures to help economic activity in the euro area, and clearly stated the requirement for fiscal policies to "support the economic rebound through public investment and lower taxation". Draghi added that "provision of an adequate public infrastructure" is important to boost growth in a sustainable manner and create employment.