Calls grow louder for ECB to print money: Reuters poll

Thu Feb 27, 2014 11:13am EST
 
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By Sumanta Dey

(Reuters) - The European Central Bank may be forced to print money this year to fight off deflation risks and boost what remains very fragile economic growth, according to a growing minority of economists polled by Reuters.

A third - 26 of 78 economists - have also penciled in a cut in the refinancing rate from the current 0.25 percent at the ECB's March 6 meeting. Most expect a reduction of 5 to 15 basis points mirroring the Bank of Japan's interest rate moves.

That is the strongest view for an easing in policy in Reuters polls since November last year when the ECB surprised markets by cutting the benchmark rate by 25 basis points.

But most agree that the ECB has nearly run out of options with rates and will need to look to more aggressive policy measures, such as purchasing sovereign bonds as the U.S. Federal Reserve, Bank of England and Bank of Japan have done.

Although still a minority view, 19 of 63 economists polled this week expect the central bank eventually to launch its own version of such stimulus and expand its balance sheet.

In the last Reuters ECB survey only a handful, 8 of 64, placed a greater than fifty percent probability of such a move.

But with data pointing to a deceleration in price growth throughout the monetary union, even in No. 1 economy Germany, and with overall economic activity languishing well below potential, that view is changing.

The ECB's primary mandate is to maintain the inflation rate at a little below two percent but price growth in the euro zone has averaged well below that for well over a year now.   Continued...

 
A picture illustration taken with the multiple exposure function of the camera shows a one Euro coin and a map of Europe, January 9, 2013. REUTERS/Kai Pfaffenbach