While inflation in the euro zone is stubbornly underwhelming, European Central Bank President Mario Draghi and his team are expected to keep its policy steady in October and hint at more action in December at the central bank’s last meeting of the year.
“The ECB is unlikely to unveil any policy changes at its forthcoming meeting October 20th. But we expect it to prepare the grounds for an extension of its asset purchase program to be announced at its following meeting in December,” said Jonathan Loynes, chief European economist of Capital Economics in a note.
The ECB’s massive 80 billion euro-a-month ($88 billion) bond-buying program is slated to expire by March 2017 and, despite fevered speculation, the vast majority of economists polled by Reuters expect an extension for quantitative easing beyond March 2017. The reason behind this is the euro zone’s soft inflation outlook. Even the latest ECB’s staff macroeconomic forecast sees inflation only slowly recovering to 1.6 percent in 2018, some way below the ECB’s mandate to keep the rate at around 2 percent.
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