European Central Bank in no hurry to yank stimulus
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FRANKFURT — Things are looking up for the European Central Bank. The 19-country eurozone economy is gathering speed. Higher oil prices should boost still-sluggish inflation, the bank's chief concern.
And, so far, financial markets haven't panicked over the bank's Oct. 26 decision to scale back its bond-purchase stimulus program, to 30 billion euros ($35 billion) a month from 60 billion euros starting in January.
So analysts aren't expecting big changes at Thursday's meeting of the bank's 25-member policy council at its skyscraper headquarters in Frankfurt.
Instead, they will scrutinize President Mario Draghi's remarks at the post-decision news conference for more hints about precisely how and when the bank might finally bring the stimulus to an end next year.
Here are the key themes to watch out for.
The ECB will release Thursday its first inflation projection for 2020 — a key indicator of whether the bank thinks it is achieving its mission of keeping annual inflation close to, but less than, 2
Analysts predict 2020 inflation of 1.8
Florian Hense at Berenberg Bank says a figure of 1.8
Oil prices are up 18
Currently, the ECB thinks inflation this year will come in at 1.5
A SUDDEN STOP?
The ECB has said the bond-purchase stimulus program will run at least through September 2018, and longer if needed. The bank left the end date open, giving itself some flexibility in case of unexpected economic trouble. Remarks by some ECB board members recently suggested no further purchases after September, and investors will listen closely for further hints from Draghi. In any case, a decision is only expected next year.
The purchases pump newly printed money into the financial system, which drives down long-term interest rates and makes it easier for companies, governments and consumers to borrow. In theory, the step should help growth and raise inflation.
The eurozone economy grew 2.6
STEADY AS SHE GOES
The bank's basic policies will remain in place Thursday. Those include a record low of zero for the main refinancing rate, the rate at which the ECB lends to commercial banks, plus a minus 0.4
RED SKY AT MORNING
The ECB's recent statements have not all been cheery. In particular, the bank warned that many eurozone banks are still burdened by bad loans and low profitability. It also suggested that global financial markets may see a sudden drop after hefty gains. So far, markets have not been spooked by the planned withdrawal of stimulus measures by the ECB and the U.S. Federal Reserve. Stock markets in Germany, the biggest eurozone economy, and in the United States have hit record highs this year.