ECB braces for QE as others shift rates

Sun Mar 1, 2015 4:15am EST
 
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By Philip Blenkinsop

BRUSSELS (Reuters) - Greek funding and quantitative easing in Europe, an expected rate cut in Australia and the buoyant U.S. labor market are set to be the focus of an economic week dominated by a host of central bank meetings.

Greece may have secured an extension of its bailout last week, but it remains reliant on emergency funding.

The European Central Bank's Governing Council convenes in Cyprus on Thursday and may take a decision on whether to accept Greek government bonds as collateral for its direct ECB funding, which it stopped doing at the start of February.

If the ECB does not - and it most likely will not - it could be forced to prolong the provision of Emergency Liquidity Assistance (ELA) to the Greek central bank.

"The Greek question will be a hot topic," said ING Chief Eurozone Economist Peter Vanden Houte. "(Greek Finance Minister Yanis) Varoufakis has been saying the country is counting on the ECB for finances over the next few months."

ECB President Mario Draghi is also expected to provide further details on the bank's 1 trillion euro ($1.1 trillion) government bond buying program, which begins in March.

He may face questions about the program's ability to reach its target, such as how the ECB intends to convince domestic banks to sell their government debt, with the prospect of then parking the money with the ECB at a negative interest rate.

The ECB will also release new economic forecasts. Chief Economist Peter Praet said last week that it was likely to revise upward its expectations for growth in the euro zone, with low oil prices and a weak euro helping.   Continued...

 
A picture illustration shows Euro banknotes in Zenica January 26, 2015.  REUTERS/Dado Ruvic