REUTERS - Traders say the European Central Bank (ECB) is likely to extend or increase its bond-buying programme in December, a Reuters poll found, while another cut to an already negative deposit rate may come but not any time soon.
ECB President Mario Draghi struck a dovish tone after the central bank meeting last week, interpreted by many as a strong signal it will expand its 60-billion-euros-a-month asset-buying programme or extend it beyond next September.
The range of probabilities in 17 euro money market traders' responses on further ECB easing of some kind ran from 40 to 80 percent, pointing to a median 70-percent chance.
Despite Draghi's assertion last year that interest rates were at their lower boundary, most traders polled said the deposit rate - now at -0.2 percent, meaning that banks pay to deposit cash overnight - could also be lowered further even if they did not expect such a cut to happen any time soon.
"Cutting the deposit facility is too simple and won't help," said a trader. "Even what they have done up to now has not had enough of a result for them to be happy. I wouldn't know, but it's not for me to invent the magical instrument - it's for them to invent that."
The median response from the poll said the deposit rate lower bound could be at -0.3 percent, while a few traders said it was even lower at -0.5 percent.
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So far the ECB's quantitative easing (QE) programme launched this year has not generated much inflation, if any.
Euro area inflation fell to -0.1 percent in September and data later this week is expected to show that consumer prices did not rise in October compared with a year ago either.
Draghi said at a news conference last week "the attitude is not 'wait and see', but 'work and assess'" as he strives to reach the ECB's 2 percent inflation target. [nL8N12M20T]
The survey also showed the ECB would lend 18.8 billion euros to banks as a part of its three-month loan operation and 68.0 billion as a part of the weekly tender. The prior figures were 21.8 billion and 65.9 billion. [nZYN0LKQ24] [nZYN0LIF25] -------------------------------------------------------------
ALLOTMENT
ONE-WEEK 3-MONTH LTRO
-------------------------------------------------------------
MEDIAN 68.0 18.8
MEAN 67.5 15.3
MODE 70.0 20.0
HIGHEST 75.0 25.0
LOWEST 60.0 10.0
COUNT 20 18
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What is the probability, in percent, the ECB announces further monetary easing in December?
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MEDIAN 70.0
MEAN 63.5
MODE 50.0
HIGHEST 80.0
LOWEST 40.0
COUNT 17
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How low can the ECB cut the deposit rate to?
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MEDIAN -0.30
MEAN -0.35
MODE -0.50
HIGHEST -0.20
LOWEST -0.50
COUNT 11
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Will the ECB cut its deposit rate in December?
3 said yes and 15 said no
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(Reporting by Siddharth Iyer; Polling by Khushboo Mittal and Hari Kishan; Editing by Louise Ireland)