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You can find the current article at its original source at http://www.theguardian.com/business/2015/oct/18/ecb-meeting-to-be-closely-watched-for-stimulus-talk-qe
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| ECB meeting to be closely watched for stimulus talk | ECB meeting to be closely watched for stimulus talk |
| (about 4 hours later) | |
| The European Central Bank is expected to hint at fresh stimulus measures to ward off the threat of deflation when it holds its next monetary policy meeting on Thursday. | The European Central Bank is expected to hint at fresh stimulus measures to ward off the threat of deflation when it holds its next monetary policy meeting on Thursday. |
| This week’s gathering takes place in Malta, under the governing council’s policy of occasionally departing from its Frankfurt HQ to visit other areas of the eurozone. | This week’s gathering takes place in Malta, under the governing council’s policy of occasionally departing from its Frankfurt HQ to visit other areas of the eurozone. |
| But although the location will be different, the event will be dominated by familiar concerns after the region’s inflation rate fell below zero last month, to -0.1%, for the first time since March. | But although the location will be different, the event will be dominated by familiar concerns after the region’s inflation rate fell below zero last month, to -0.1%, for the first time since March. |
| City economists predict that ECB president Mario Draghi will repeat his pledge from September to add more stimulus if needed. However, few expect decisive action this week. | City economists predict that ECB president Mario Draghi will repeat his pledge from September to add more stimulus if needed. However, few expect decisive action this week. |
| “The ECB’s October meeting is for watching. Draghi’s message will be dovish, but it’s not time to act yet”, said Holger Sandte, chief European analyst at Nordea Bank. | “The ECB’s October meeting is for watching. Draghi’s message will be dovish, but it’s not time to act yet”, said Holger Sandte, chief European analyst at Nordea Bank. |
| The ECB is currently committed to buying €60bn (£40bn) of government and corporate bonds each month until September 2016, in an €1.1tn (£810bn) attempt to stimulate growth, inflation and bank lending. | |
| But last week, ECB policymaker Ewald Nowotny declared that it was “quite obvious” that additional instruments would be needed, as the ECB is now “clearly missing” its inflation target. | But last week, ECB policymaker Ewald Nowotny declared that it was “quite obvious” that additional instruments would be needed, as the ECB is now “clearly missing” its inflation target. |
| Nowotny’s comments mean that “further ECB stimulus as soon as next Thursday certainly cannot be ruled out,” said Howard Archer of IHS Global Insight. | Nowotny’s comments mean that “further ECB stimulus as soon as next Thursday certainly cannot be ruled out,” said Howard Archer of IHS Global Insight. |
| Capital Economics’s Jonathan Loynes said that ECB will boost its QE firepower €80bn a month in December, but does not totally rule out an announcement this week. | Capital Economics’s Jonathan Loynes said that ECB will boost its QE firepower €80bn a month in December, but does not totally rule out an announcement this week. |
| The eurozone’s return to negative inflation is driven by cheaper energy costs, which fell 8.9% year-on-year following the tumble in oil prices. This countered a 1.2% rise in service sector prices, and a 1.4% rise in food, alcohol and tobacco costs. | The eurozone’s return to negative inflation is driven by cheaper energy costs, which fell 8.9% year-on-year following the tumble in oil prices. This countered a 1.2% rise in service sector prices, and a 1.4% rise in food, alcohol and tobacco costs. |
| Eurozone firms are also being squeezed, and receiving less for their goods. Producer prices fell by 2.6% year-on-year in August last year, their steepest annual fall since February, suggesting deflationary pressures are building. | Eurozone firms are also being squeezed, and receiving less for their goods. Producer prices fell by 2.6% year-on-year in August last year, their steepest annual fall since February, suggesting deflationary pressures are building. |
| Yann Quelenn, market analyst at Swissquote Bank, said investors already anticipate that the ECB’s QE programme will be extended beyond next September. But a formal announcement may not come until early 2016, he adds. | Yann Quelenn, market analyst at Swissquote Bank, said investors already anticipate that the ECB’s QE programme will be extended beyond next September. But a formal announcement may not come until early 2016, he adds. |
| “By officially announcing an extension of QE, Draghi will be essentially admitting that the monetary programme is not as efficient as it should be,” said Quelenn. | |
| “For this reason, we believe that he will hold off on making any official commitments for the moment but will continue to drop hints.” | “For this reason, we believe that he will hold off on making any official commitments for the moment but will continue to drop hints.” |
| Last month, rating agency Standard & Poor’s declared that the eurozone will eventually need $2.4 tn of QE. | Last month, rating agency Standard & Poor’s declared that the eurozone will eventually need $2.4 tn of QE. |
| The governing council must also digest recent disappointing economic data from the eurozone’s largest economy. | The governing council must also digest recent disappointing economic data from the eurozone’s largest economy. |
| “German data for August saw sharp falls in exports and industrial production; perhaps a result of slowing global demand,” said Chris Hare of Investec. | “German data for August saw sharp falls in exports and industrial production; perhaps a result of slowing global demand,” said Chris Hare of Investec. |
| Hare also said that Draghi will continue to emphasise a willingness to add more stimulus if needed on Thursday, but will not announce fresh measures just yet. | Hare also said that Draghi will continue to emphasise a willingness to add more stimulus if needed on Thursday, but will not announce fresh measures just yet. |
| The ECB’s position is complicated by the uncertainty over when the US Federal Reserve will raise US borrowing costs. It resisted a rate hike in September, and may now not act this year. | |
| That has weakened the value of the dollar against the euro – an unwelcome development for the ECB because it adds to deflationary pressures in Europe. |