MNI SOURCES: ECB May Cut Rate As Soon As Next Week

     LONDON (MNI) - The European Central Bank may cut its benchmark deposit rate

and take targeted easing measures as soon as at its meeting March 12 in a

packaged response to the coronavirus epidemic, ECB officials told MNI, though

one cautioned a move might not come for a few weeks.

     "Maximum consensus will define the probable package," replied one of the

ECB officials, when asked whether moves would include a cut in the deposit rate

and measures to provide cheap loans for businesses hit by disruption from the

virus.

     Another of the sources said that "not all countries are on board" with a

cut, which could come "next week or in the next few weeks," but added: "The pace

at which things are changing is accelerating at an incredible pace. There's more

mounting pressure, need to make a move, or at least to signal that one is coming

shortly."

     "Growth forecasts will be very gloomy, I'm afraid," the source said, "We're

bracing for a significant impact, particularly in the longish term."

     Pressure on the ECB has increased since the Federal Reserve's emergency

50-basis-point rate cut on Tuesday, with markets pricing in a further 38 basis

points in U.S. easing by the end of March. The euro gained about 0.4% after the

Fed move, and further cuts by the world's most important central bank could send

the exchange rate to uncomfortable levels for the eurozone economy.

     --LESS ROOM FOR MANOEUVRE

     "The Fed has more room for manoeuvre," a third source said, adding that

"The ECB might wait until next week."

     "There might be an opinion also within the ECB that it's better to wait a

few days and then come on with a reaction, whatever that reaction will be,

because there are two advantages: first of all there's more time to find real

common ground within the council, and second, it wouldn't be an extraordinary

thing as there will be a Governing Council next week anyway," the third source

said, agreeing that it was possible the central bank might decide on a rate cut

together with targeted measures.

     "The markets are quite sensitive, and it really is a question of timing and

the kind of response which might fit the expectations best," the source said.

     It might take some time to determine the potential size and characteristics

of an emergency loan programme, which would resemble previous targeted

longer-term repurchasing operations, or TLTROs, another ECB official told MNI.

     "The amounts always depend on what is requested by banks in the end," this

source said. "On [loans to small- and medium-sized businesses], first we need to

know whether there is really an issue and then whether it's possible to target

them specifically."

     Asked how long it might take to decide how big any such programme could be,

the source replied: "Are you kidding? In the financial crisis amounts took

months."

     An ECB spokesman said he could make no response to the sources' comments.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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