Rate cut in store at ECB meet

Berlin, November 29

The European Central Bank (ECB) will roll out its big guns at its monetary policy meeting this week, ramping up its trillion-euro asset purchases and cutting key rates to hike weak inflation, analysts said.

Fed up with an inflation rate that is stubbornly far below target of close to two per cent, ECB Chief Mario Draghi has in recent weeks multiplied pledges to ‘do what we must’ to lift consumer prices in 19-member eurozone.

In what was viewed as an attempt to lay out his case for more stimulus, Draghi also presented a morose state of economy at a banking conference earlier this month.

“We can’t yet say with confidence that the process of economic repair in the euro area is complete,” he said, noting that global growth is expected to be the weakest since 2009, while the rebound in eurozone is the lowest since 1998.

For Jonathan Loynes, an analyst at Capital Economics: “The question is not whether ECB’s governing council

will loosen monetary policy at its meeting on December 3, but rather whether it will do so decisively enough to meet the very strong expectations stoked up by its own dovish signals.”

“Anything less than a marked acceleration in the pace of its monthly asset purchases and a significant cut in its deposit rate would now come as a severe disappointment,” he said.

The ECB launched in March a 1.1-trillion-euro scheme to help lift consumer prices. The quantitative easing programme to buy sovereign bonds at a rate of 60 billion euros a month runs until at least September 2016, but inflation came in at zero in October.

At the ECB board’s last meeting on October 22, the question of whether to cut interest rates again surfaced as a potential tool to boost consumer prices.