posted at 22:50
Author Name: Benoit Toussaint
ECB set to sit tight on rates despite moribund economy
Unlike moves by the US Federal Reserve to end its stimulus spree and a surprise monetary easing plan by the Bank of Japan, ECB policymakers are expected to sit tight at their monthly meeting. The week looks set to be particularly busy for the ECB, which on Tuesday takes on its role as Europe's banking watchdog in a historic shake-up to help ward off another financial crisis. Howard Archer, of IHS Global Insight, said no new ECB decisions were likely for the time being, adding that "The bank will very probably remain in 'wait and see' mode into the New Year". Interest rates are currently at their all-time lows anyway - 0.05 percent for its main "Refinancing" rate - and a rate hike seems unlikely at a time when the ECB is seeking to boost inflation from its stubborn lows. Inflation in the 18-nation eurozone edged up to 0.4 percent in October, official data showed Friday, far below the 2.0 percent target set by the Frankfurt-based ECB, which has a core mission of ensuring price stability. "If survey-based inflation expectations fall further, the pressure for additional ECB monetary easing will increase," Commerzbank's chief economist Joerg Kraemer said, however. The ECB is launching purchases of asset-backed securities, or bundles of individual loans such as mortgages, car loans and credit-card debt sold on to investors, to allow banks to share the risk of default and free up funds to offer more lending. Analysts have suggested that some banks may have preferred to hold off until after the results of the ECB's most stringent-ever audit were published.

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