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 Focus now shifts to the after-meeting news conference where market
participants seek clues from ECB President Mario Draghi on how close
the ECB is to launching more aggressive easing steps, such as
quantitative easing (QE) - or printing money to buy large amounts of
government bonds.
There has been mounting discomfort among Governing Council members
over Draghi's leadership style and any indication on how strong the
president's backing in the Council is will be crucial for future
policy moves.
Reuters reported on Tuesday national central bankers in the euro
area planned to challenge Draghi over his earlier mention of a
balance sheet target for how much money the ECB plans to pump into
the economy with its latest stimulus.
"It will be exciting today after the reported dispute in the
Governing Council. Will Draghi mention the balance sheet target
again? If he does not, it would indicate that QE is still distant,
because there is more resistance than we thought," said Johannes
Mayr, economist at BayernLB.
Italian Economy Minister Pier Carlo Padoan swung in behind Draghi on
Thursday, saying he had high regard for the former governor of the
Bank of Italy.
"As I have always said, I have the utmost regard for Mario Draghi
but I don't want to get into questions that have an air of gossip
about them," Padoan said in Brussels, where he was attending a
meeting of euro zone finance ministers.
MEAGER GROWTH PROSPECTS
The November policy meeting takes place against a backdrop of meager
growth prospects for the euro zone, but little-to-no action is
expected on further stimulus despite growing pressure.
The Paris-based Organisation for Economic Cooperation and
Development (OECD) on Thursday called on the ECB to live up to a
promise "to do what ever it takes" to revive its economy and begin
purchasing government bonds.
"We think the ECB is in a 'wait and see' mode now and do not expect
new policy measures or major new guidance to be provided," said UBS
economist Reinhard Cluse.
To keep the euro zone from slipping into deflation, the ECB has
started pumping more money into the banking system through purchases
of private debt and offers of long-term loans, aiming to boost its
balance sheet by up to 1 trillion euros.
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There is growing doubt whether its current measures will be enough,
but the ECB is expected to wait until it gets a clearer view of the
economy and the impact of its asset purchases and four-year loans to
banks before adding further stimulus.
"My sense is that it's not sufficient and that we will see the ECB
stepping up and buying corporate bonds," said Moody's Analytics
chief economist Mark Zandi, pointing to next year.
Many economists are already looking towards December when the ECB
will update its economic projections.
ECB staff in September forecast growth of 0.9 percent this year and
1.6 percent in 2015, with inflation reaching 1.4 percent in 2016 -
below its medium term target of just under 2 percent. Inflation
stood at 0.4 percent in October.
"The ECB will have to slash its staff projections for growth and
inflation substantially in December. That will be a strong argument
for loosening policy further," said Berenberg chief economist Holger
Schmieding.
He pointed to a probability of at least 60 percent that the ECB
would step up its stimulus in December, probably by widening its
asset purchases to include corporate bonds.
More drastic measures in the form of outright purchases of sovereign
bonds - as deployed by other major central banks to boost their
economies - still remain distant in the euro zone, mainly due to
political hurdles, especially in Germany.
(Additional reporting James Mackenzie, Editing by Jeremy Gaunt)
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