ECB to ease in December but deposit rate cut unlikely: traders

(Reuters) - Euro money market traders see a median 70 percent chance of the European Central Bank easing monetary policy further in December, a Reuters poll found, but they said another cut to an already negative deposit rate was not likely.

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 program or extend it beyond next September.

The range of probabilities in 17 trader responses on further ECB easing of some kind ran from 40 to 80 percent.

Despite Draghi's assertion last year that interest rates were at the lower bound, most traders polled said the deposit rate, now at -0.2 percent, 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.

So far the ECB's quantitative easing (QE) program launched earlier this year has not generated much inflation at all.

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 that "the attitude is not 'wait and see', but 'work and assess'" as he strives to reach the ECB's 2 percent target.

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 euros as a part of the weekly tender. The priors were 21.8 billion and 65.9 billion euros.

(Reporting by Siddharth Iyer; Polling by Khushboo Mittal and Hari Kishan; Editing by Hugh Lawson)

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