A good deal is at stake for the European Central Bank (ECB) and the eurozone on Thursday, when the ECB announces what it will do to ward off the threat of deflation and help revive the large stagnating parts of euro area.
Not least at risk is the reputation of the ECB’s charismatic president, Mario Draghi, who just under a month ago said that he and his colleagues on the ECB’s governing council were “comfortable with acting next time”.
Well “next time” is three days away. And if the ECB were to announce no monetary stimulus, or a package regarded as a damp squib, Mr Draghi’s authority would be seen to be impaired.
Apart from anything else, I have rarely if ever come across greater confidence among investment bankers and the media about what a major central bank would do: the era of central banking mystery, at least in the case of the ECB, seems well and truly over.
Unless of course there has been a spectacular mismanagement of market expectations – in which case the consequences for the ECB’s credibility would be pretty close to catastrophic.