The Eurozone is geared up to receive a policy boost this week, with the majority of analysts expecting the European Central Bank (ECB) to ramp up its €1.1 trillion (£780bn) asset purchase programme this Thursday.
“President Draghi and board members have been unequivocally dovish, indicating that the ECB was working on different options to ease policy further, should it appear necessary in light of the updated staff projections and downside risk to price stability,” said economist Wai Ho Leong from Barclays.
“At the same time, there is a risk now that the ECB disappoints markets given the very high expectations.”
Leong believes markets are also pricing in a cut in the interest rate paid on bank reserves kept at the ECB. The rate is currently minus 0.2 per cent, but many are expecting a cut to minus 0.3 per cent.
The asset purchase programme, which was launched in March at a rate of €60bn a month, is expected to have its end-date extended beyond September 2016, as originally announced.
Economists at Bank of America Merrill Lynch expect it to go on for a further 12 months, which at the current rate would take the money printing project’s size to just shy of €2 trillion. They also believe the lift in the asset purchase programme will be accompanied by a rate cut.
The policy is designed to boost inflation, which is currently hovering around zero per cent, and growth in the struggling currency-bloc.