Even as the euro zone economy shows faint signs of stirring, the European Central Bank is likely to send a dovish message this week that more monetary help will be on the way before long.
After a plunge in inflation to 0.7 percent in the year to October, well below the ECB’s target of just under 2 percent, UBS and RBS are among those who reckon a rate cut could come as soon as Thursday’s policy-setting meeting.
At the very least economists expect ECB President Mario Draghi to indicate that the balance of risk has tilted toward further easing, partly because the recent strength of the euro will hurt exports with a lag.
But many believe it would make more sense for the ECB to hold fire until December, when the bank’s staff updates its growth and inflation forecasts.
“A significant downward revision to its inflation number for next year—let’s say at or below 1 percent, from 1.3 percent currently—may push the ECB to act,” said Giuseppe Maraffino, a bond analyst at Barclays.