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 Having yet to implement or fully explain some of the measures he
announced last month, Draghi is set to give investors more
information about the European Central Bank's latest plan to buy
corporate bonds.
Ahead a press conference at 1230 GMT, the ECB announced that it
would keep its main refinancing operations rate -- setting the price
for banks to borrow -- at zero while it will continue to charge them
0.4 percent for parking money at the ECB.
Having launched a 1.7 trillion euro ($1.93 trillion) money-printing
scheme and offered to pay banks to borrow from it to urge them to
lend, the ECB will maintain a holding pattern for now.
Its biggest headache may be a nasty spat with Berlin after Finance
Minister Wolfgang Schaeuble said its policies were causing
"extraordinary" problems for Germany and were in part to blame for
the rise of the right-wing anti-immigration Alternative for Germany
(AfD).
Late on Wednesday, Schaeuble stuck to this tough line, saying that
"a long period with zero and negative interest rates is not a
sensible situation".
The ECB has been easing policy, charging banks ever more for
hoarding their money with it and buying everything from state bonds
to company debt to prop up a faltering economy.
Draghi may justify that by referring to flagging inflation, which
the ECB uses as a guide to economic health and the success of its
actions but which now stands at zero - far below the ECB's target of
just below 2 percent.
Central banks worldwide have been keeping money cheap. Sweden's
central bank expanded its asset-buying scheme on Thursday, despite
the fact that its economy is in danger of overheating.
'ECB BASHING'
Disagreement with Germany, the strongest economy in the euro zone
and de facto leader of the currency bloc, casts a cloud over the ECB.
"ECB-bashing has become fashionable in Germany," said Carsten
Brzeski, an analyst of ING.
"This can paralyze the euro zone because it means the policy mix
continues to be in deadlock. They will not move on issues such as
Greek debt restructuring."
The ECB seems to have the edge in the debate for now after Schaeuble
backtracked on some of his comments and Bundesbank chief Jens
Weidmann, the ECB's biggest critic to date argued that its stance
was appropriate.
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The criticism is nonetheless damaging. "Any conflict between a major
stakeholder and top management carries risks," Berenberg analyst
Holger Schmieding said.
"It may destabilize the institution and blunt its message,"
Schmieding said. "The current dispute goes a bit beyond an awkward
nuisance. At the margin, it may constrain the ECB's room for
maneuver slightly."
Many in Germany blame low interest rates for sapping returns on
their savings, while banks have protested loudly that it is
squeezing their modest profits.
IMF figures suggest German and Portuguese banks will take the
biggest earnings hit from falling interest rates.
Draghi, however, is likely to reject the German criticism, outlining
an even darker path for growth and inflation if the ECB gives up.
The longer term prospects have barely improved. The euro zone
five-year, five-year breakeven rate <EUIL5YF5Y=R>, a key
market-based expectation that predicts long-term inflation, dipped
to 1.39 percent on Wednesday, well below the 1.49 percent when the
ECB announced its March package.
Of particular concern could be the nearly 5 percent rise in the
trade-weighted euro since its early December low.
(Story refiles to correct dollar conversion in graf 4).
(Additional reporting by Francesco Canepa; Editing by John
Stonestreet and Hugh Lawson)
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