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After substantial measures taken in 2015 and with the ongoing recovery, no further policy easing is expected from the ECB, however, with Core Inflation around 1% Y/Y, the ECB's further easing cannot be ruled out. The next ECB policy meetings are scheduled on 21 January and on 10 March.
"The latest decline in oil prices means that the moderate increase in inflation that we continue to expect will start from a lower basis. We therefore lowered our inflation forecast for next year from 1.1% y/y to 0.8% y/y, after zero inflation last year," commented Nordea Research.
If the oil prices and the inflation rate continue to drop, then markets can expect much more from the March meeting, while further easing is doubtful from January meet. An inflation forecast below 2% in 2018 could validate not only a cut in the deposit rate but also more aggressive asset purchases.
