Even chance ECB to start printing money: Reuters poll

Fri Nov 18, 2011 4:13am EST
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By Ana Nicolaci da Costa

LONDON (Reuters) - The European Central Bank could soon bow to pressure to print money to prevent a further escalation of the euro zone's debt crisis, with respondents in a Reuters poll giving an even probability the ECB would adopt a policy of quantitative easing.

The poll of 50 bond strategists across Europe and the United States conducted this week gave a median 48 percent probability that the ECB will be forced to conduct outright quantitative easing (QE).

That would be a highly controversial break from its existing policy, where it offsets government bond purchases in its Securities Markets Programme by draining liquidity from the system in separate operations.

Of those who predicted the ECB would start QE, as the Federal Reserve and the Bank of England have done, a majority said it would happen by March 2012.

A slim majority, 25 of 49, of analysts saw an even bigger role for the ECB, expecting it to become the lender of last resort, providing emergency loans for governments.

ECB policymakers have rejected international calls to intervene decisively to shore up the euro zone, but volatility in regional debt markets in recent weeks has made a decision on a bigger role for the monetary authority more pressing.

"At this juncture, only the ECB has the power to calm market tension in the short term, while we wait for peripheral governments to approve reforms, key to reviving market confidence," said Thomas Costerg at Standard Chartered.

Contagion spreading beyond peripheral countries to the European core has piled on the pressure for bolder action.   Continued...