Signs point to March meeting for ECB decision on printing money

Mon Dec 1, 2014 9:55am EST
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By Paul Carrel

FRANKFURT (Reuters) - Momentum is building for the European Central Bank to launch a program of sovereign-bond buying to boost the struggling euro zone economy with most signs pointing to March for a decision.

With Germany, Europe's economic powerhouse, refusing to unleash fiscal stimulus and other governments taking time to reform their economies, responsibility is falling on the ECB to bolster growth and fend off deflation.

It is arguably becoming more urgent. Euro zone inflation slowed to 0.3 percent last month, far below the target of just under 2 percent and in what the ECB sees as a "danger zone".

Growth, meanwhile, has stalled, with some of the euro zone in recession and the bloc as a whole just above water.

Printing money to buy bonds - known as quantitative easing, or QE - would in theory boost both inflation and add to growth.

Reflecting this, ECB President Mario Draghi opened the door in a Nov. 21 speech to stronger stimulus. His deputy, Vitor Constancio, went a step further last week, saying the bank would be better able to gauge in the first quarter whether to buy sovereign bonds.

"Now, it's too soon to make that assessment but indeed in early 2015 we have to look and assess if the (existing) programs are having the effect that we are expecting," Constancio told Reuters in a television interview.

That has many looking to the ECB's March 5 meeting for a QE launch. The two before then - in December and January - are seen as too soon; afterwards some believe it may be too late.   Continued...

ECB President Mario Draghi waits to take the flloor during the Quarterly Hearing before the Committee on Economic and Monetary Affairs of the European Parliament in Brussels November 17, 2014. REUTERS/Eric Vidal