Mario Draghi has left little room for doubt. Ninety percent of economists in the Bloomberg Monthly Survey predict the European Central Bank president will ease monetary policy in June after saying on May 8 that officials are “comfortable” with acting then. While that allows investors to prepare for added stimulus and a weaker euro, it also sets them up for a bigger disappointment should he fail to deliver.
Almost a year after Draghi pledged to support the euro-area recovery with low interest rates, the central bank is faced with mediocre economic growth and inflation at less than half its goal. That’s increased the odds policy makers will step up their response with radical measures that could range from negative deposit rates to asset purchases.
“Draghi clearly pre-committed,” said Elwin de Groot, an economist at Rabobank in Utrecht, the Netherlands. “As any other central banker should know, he would risk his reputation, and a significant strengthening of the euro, if the ECB doesn’t follow through in June.”
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