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ECB 7 May Council Preview
DEEPENING RECESSION WARRANTS FURTHER POLICY RELAXATION, WITH NEW 'CREDIT EASING' MEASURES EXPECTED THURSDAY BUT RATE CUT LESS LIKELY
· Further evidence of deepening recession in Q1 but tentative signs of bottoming-out in Q2.
· 'Headline' inflation rate remains abnormally low and 'core' inflation falls further.
· Money market tensions remain, while money and credit growth continue to slow.
· Further relaxation of monetary policy stance warranted, with additional 'credit easing' measures expected to be announced this Thursday and a 25 bp cut in the 'refi' rate, to 1.0%, possible but unlikely.