2012.06.01 17:43:35 ROUNDUP: Analyst Predictions For The ECB Meeting

By Laura Clarke Of DOW JONES NEWSWIRES LONDON (Dow Jones)--As the European Central Bank mulls the worsening economic landscape and heightened euro-zone fears, observers have their ears to the ground to determine what the central bank might say when it updates markets on policy next Wednesday. A rate decision from the ECB at 1145 GMT is followed at 1230 GMT by a press conference hosted by ECB President Mario Draghi. Here is a rundown of what some analysts and economists expect from the ECB and the currencies market. DANSKE BANK: Expects the ECB to cut its main refinancing rate by 25 basis points, taking the rate from 1% to 0.75% as recent euro-zone growth indicators have deteriorated. Thinks a cut is already partly priced in the market, even though the consensus among analysts is for unchanged rates. It adds that the threshold for any additional non-standard measures is "very high" this side of the Greek elections on June 17 and the European Union growth summit on June 29. If market sentiment worsens on Greek or Spanish concerns, this would trigger additional non-standard measures such as longer-maturity long-term refinancing operations, or LTROs, at future meetings, it says. BNP PARIBAS: Economists here predict a 25-basis-point rate cut from the ECB. "This is likely to be bearish for the euro," it says. It thinks the euro could fall to $1.22 against the dollar in the event of a rate cut. CREDIT AGRICOLE: Expects the ECB to cut its main refinancing rate by 25 basis points while leaving the deposit rate at 0.25% because of easing inflationary pressures. It says that forecasts remain skewed towards "a delayed monetary response," not least because the ECB might want to keep some ammunition for after the Greek elections. It says the ECB is likely to contemplate fresh non-standard measures such as a new LTRO, with an announcement possible at the July meeting. BROWN BROTHERS HARRIMAN: Thinks there could be a chance that ECB will cut rates following the string of poor euro-zone economic data. It suspects the market is underestimating the risk that the ECB will respond to poor economic fundamentals by way of a rate cut to stem the flow. "Draghi has shown he can take decisive action," it says. NOMURA: Assigns a 30% probability that the ECB will cut rates but thinks the ECB is more likely to keep its powder dry until there is more clarity on Greece's euro-area membership. In this case, a rate cut could come in July with some added liquidity-related stimulus that would be euro-positive. In the worst-case scenario, if financial-market conditions continue to deteriorate between now and next Wednesday, it thinks the ECB will be forced to respond with a more drastic policy response, including at the very least a rate cut. SOCIETE GENERALE: Is less than convinced that the ECB will cut rates but thinks this is an opportunity for the ECB governing council to take stock. "It should now be obvious that the euro area is fast heading back to the precipice... As a result, the immediate outlook for inflation is likely to be distinctly lower than a few months ago," it says. BNY MELLON: Expects no change to rates or stance from the ECB but may signal it stands ready to do more. However, it says Draghi is a tricky character to judge so it impossible to know whether he is susceptible to political pressure to cut rates. The bank says the market hasn't positioned itself towards any solid expectations for the decision, "otherwise the euro would be trading higher." But there are bets at the margins so the bank expects the euro to strengthen on any remedial action by ECB such as a liquidity injection. LLOYDS BANKING GROUP: Expects no change in the main rates and no new LTRO in line with much of the market. While it acknowledges there is a chance of much more radical action in the coming months if sentiment sours further after the Greek election. It expects a modestly positive knee-jerk euro reaction on no rate cut but any rally will be short-lived as the lack of action ultimately won't be seen as helping anything in the longer term, it says. -By Laura Clarke, Dow Jones Newswires; 44 20 7842 9496; laura.clarke@dowjones.com; @djfxtrader (END) Dow Jones Newswires June 01, 2012 11:43 ET (15:43 GMT)