LIVE MARKETS-Case for ECB easing rates not yet proven, says Deutsche Bank

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

CASE FOR ECB EASING RATES NOT YET PROVEN, SAYS DEUTSCHE BANK

The European Central Bank is unlikely to change policy at its Thursday meeting, even as recent euro EUR= strength has triggered chatter about potential rate cuts.

And while the euro's appreciation has highlighted the risk of the 2% inflation target being undershot, "the case for a further easing of monetary policy has not been proven yet," Deutsche Bank Research economists said in a note.

So, what would it take for the ECB to ease policy then?

First on the list is inflation falling below target, but only if the deviation were " large enough and persistent enough", they wrote.

January flash euro zone inflation came in at 1.7%, as expected.

Next up, a single 25-basis-point cut alone would not be considered all that impactful. As a result, "the ECB is likely to ease only if it thinks more than one 25bp cut is required," raising the bar for easing.

Third, rate cuts are more likely if weaker growth and/or inflation are demand-based, cyclical and persistent, rather than supply-based, structural and temporary.

And finally, "there can be a 'risk management' rationale for easing monetary policy." The ECB would be sensitive to a "sufficiently large and persistent" inflation outlook downgrade, and "a deterioration in the balance of risks to the outlook," Deutsche Bank said.

(Sophie Kiderlin)

EARLIER ON LIVE MARKETS:

AI WON'T EAT CYBERSECURITY, SAYS BERENBERG CLICK HERE

SOFTWARE BREATHES, MINERS SLUMP, BANKS MIXED CLICK HERE

BEFORE THE BELL: CENTRAL BANK DAY IN EUROPE, EARNINGS RUMBLE ON CLICK HERE

SKITTISH INVESTORS HAUNTED BY TECH SELL-OFF CLICK HERE