Research Team at BBH, suggests that the ECB is at the Centre stage today and the larger context of the meeting is the political leadership vacuum with Merkle exhausting much of her political capital on the refugee challenge. Key Quotes “There are also growing doubts among investors of the efficacy of negative interest rates and QE itself. The scar tissue from the December disappointment is still fresh. The economic backdrop is one of renewed deflation, fragile and uneven growth (though Germany and France have reported stronger than expected January industrial output figures). As Draghi noted previously, fiscal policy may be marginally relaxed due to refugee-related spending. There are several moving parts in the ECB's unorthodox stance. To the extent, there is an agreement among economists it is that the cuts in the staff forecasts for inflation and growth will allow the ECB to cut the deposit rate another 10 bp to minus 40. There are some who think that to get ahead of the curve of expectations the ECB will cut 15-20 bp. The OIS market shows rates bottoming near minus 50. There is also anticipation of a tiered system so to mitigate the pressure on banks. Note that last year, net interest revenue actually rose for banks, according to Bloomberg, as lending volumes offset the lower price. There is also a loose consensus that the ECB will increase the pace of its purchases. Most expect a 10 bln euro increase (to 70 bln euros a month). Some look for a larger 15-20 bln increase. There is some thought to suspend the capital key as the determining element but is highly contentious. If it is announced, it would be supportive of peripheral markets. There are also some economists that look for a new asset class to be included, like corporate bonds or senior tranches of systemically important banks. Most do not expect the duration of the asset purchases to be extended beyond the current March 2017. Lastly, there is some speculation of a new long-term repo operation.” For more information, read our latest forex news.