QE or not QE? Spotlight on the ECB as inflation dips

Sun Nov 30, 2014 4:02am EST
 
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By Ingrid Melander

PARIS (Reuters) - The ECB's monthly rate meeting will focus minds this week on the debate over quantitative easing in the euro zone, as a series of data releases on both sides of the Atlantic sheds more light on European woes and U.S. strength.

Final purchasing manager indices for Europe and the United States, U.S. monthly jobs data and the European Central Bank's updated forecasts will all provide clues to assessing the relative health of both regions.

The ECB staff inflation and growth estimates for the 18-nation single currency union are much awaited after data showed on Friday that inflation in the bloc was back to a five-year low, putting more pressure on the bank to take action.

Particular attention will be paid to internal debate within the ECB over quantitative easing and to ECB chief Mario Draghi's comments on the data at his monthly news conference on Thursday, after his pledge to act to lift "excessively low" inflation.

The ECB is expected to leave key rates unchanged and wait for next year to decide whether to take the leap to government bond-buying.

A decision on QE may come as early as the first quarter, Vice President Vitor Constancio said last week. But arch-hawk German ECB policymaker Jens Weidmann responded that there were "legal limits" on printing money to buy government bonds.

"The ECB's communication has not always been crystal clear this year, but overall it has moved steadily towards a more dovish stance despite internal tensions within the Governing Council," French bank Credit Agricole wrote in a note.

"We expect no sovereign QE announcement at the December 4 meeting but a more formal, albeit conditional commitment to broader asset purchases."   Continued...

 
A euro logo sculpture stands in front the headquarters of the European Central Bank (ECB) in Frankfurt October 26, 2014.  REUTERS/Ralph Orlowski