ROUNDUP:

 What To Expect From The ECB: Banks' Views

LONDON (Dow Jones)--The European Central Bank is widely expected to respond
to growing evidence that the euro-zone economy is heading back into recession
Thursday by announcing a fresh interest-rate cut at 1245 GMT. The following
press conference, at 1330 GMT, will attract its usual close attention. Here is
a quick rundown of what the banks expect to see:
BARCLAYS CAPITAL: ECB to cut the key refinancing rate by 25 basis points to
1%, and commit to more non-standard measures such as a new two- to three-year
long-term refinancing operation program, which will provide liquidity. The bank
expects this to be followed by another rate cut at the start of 2012. Downward
pressure on the euro will be limited.
BNP PARIBAS: Equal chance of a 25bp or 50bp rate cut. The euro's reaction to
25bp cut would be muted, but a 50bp cut would suggest the ECB is much closer to
entering a formal quantitative-easing program and so the currency is likely to
extend losses.
BROWN BROTHERS HARRIMAN: Disagrees with the market consensus and is pushing
for a 50bp cut, or some sort of quantitative-easing measures that would reflect
the ECB's confidence in EU officials to reach a broad compromise on the
euro-zone crisis. A 50bp cut could push the euro higher because it signals that
confidence.
CITIGROUP: Expects a minimum of a 25bp rate cut and an extension of the LTRO
program. What ECB President Mario Draghi has to say at the press conference on
fiscal integration will be of more interest to the market than the rate
decision.
COMMERZBANK: Likely to cut refi rate back to 1% but measures to fight the
crisis will be announced. Tender operations with maturities above one year and
weaker collateral rules are likely. If Draghi is overly cautious at the press
conference, the euro might initially suffer but then rebound.
CREDIT SUISSE: A 50bp cut is possible and repurchase agreement rates are
expected to be cut by a further 25bps. Announcement of long-term repo
operations of greater than one year in tenor is a possibility, along with the
loosening of collateral rules. While the rate cut would dent the euro, the
currency could later rally from policy action that relieves perceptions of
systemic stress.
DANSKE BANK: Agrees with the market consensus that the ECB will continue its
easing bias and deliver another 25bp rate cut. Anything less would be a major
surprise. However, the banks believes the economic situation in the euro area
has deteriorated notably so a 50bp cut could be a possibility. In terms of
non-conventional measures ECB may introduce 24-month LTROs with fixed-rate
full-allotment auctions. It could also ease collateral requirements.
DEUTSCHE BANK: Sees a 25bp cut to refi rate, no chance of 50bps, and
additional 12-month LTROs for the first and possibly second quarters. Also
expects the ECB to forecast euro-zone growth at around 0.3% in 2012 and to
forecast two consecutive years of below-target inflation.
GOLDMAN SACHS: Expects a 25bp refi rate cut as well as additional measures of
credit easing to support the financial sector in peripheral markets.
JP MORGAN: Predicts a 25bp rate cut and the introduction of 18- to 24-month
LTRO facility for banks.
MORGAN STANLEY: Expects a 25bp rate cut with a chance of a 50bp move. The
unlimited liquidity offering to commercial banks may be increased to two or
even three years. A 50bp cut could put substantial pressure on the euro.
NOMURA: Expects a 25bp cut, with the small chance of a chunkier 50bp move. A
further 25bp cut could be possible in January. The bank also expects the ECB to
introduce a 24-month LTRO facility, as well as to tweak collateral
requirements. Comments on fiscal integration at the conference could lift the
currency.
RABOBANK: Acknowledges the market expects a 25bp cut but expects no change to
the key interest rate this time. Instead, it sees a pause until January.
However, the central bank may step in with the use of liquidity measures,
including longer tenders and a temporary easing of collateral requirements.
ROYAL BANK OF SCOTLAND: Looking for a refi rate cut of 25bps with no corridor
change but sees risks clearly skewed towards a 50bp cut. In addition RBS is
looking for a further loosening of the collateral policy in euros, and a move
towards accepting dollar collateral. The central bank won't deploy QE at this
stage.
SOCIETE GENERALE: A 25bp cut is highly likely, as is an extension of
refinancing operations to two years and loosening of the collateral
arrangements for providing liquidity. Deposit rates will be cut to 0.25%, which
could drag the whole rate curve down and would be a recipe for the euro to slip
under $1.30 in the new year. Market is more likely to welcome supportive
comments from Draghi on fiscal integration ahead of the EU leaders' summit in
Brussels.
UBS: Expects the ECB to cut its key interest rate by 25bps. A further cut is
expected in the first quarter, taking the rate to 0.5%, which reflects the
Swiss bank's lower euro-zone growth forecast. The ECB may introduce a number of
non-conventional measures including measures to address medium- and long-term
bank funding.