posted at 18:50
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ECB set to talk up stimulus measures but hold fire
Given the alarming drop in eurozone inflation in recent months, the heat has increased on the ECB to undertake massive stimulus measures like central banks in Britain, Japan and the United States have done. The ECB is scheduled to publish its own latest updated inflation and growth forecasts and is worried that medium-term inflation expectations could become permanently de-anchored from its target of around 2.0 percent. The ECB has already launched a multi-pronged offensive against deflation, cutting its interest rates to new all-time lows, making unprecedented amounts of cheap loans available to banks via its LTRO and TLTRO programmes, and unveiling asset purchase programmes to pump liquidity into the financial system. QE is the large-scale purchase of government bonds and such a policy has many critics in Europe, not least the German central bank or Bundesbank, because it is felt that it takes the ECB outside its remit and is effectively a licence to print money to get governments out of debt. "The ECB will aim to send out a strong message this Thursday that it will do what it takes to raise inflation and inflation expectations as fast as possible," said Berenberg Bank economist Christian Schulz. Last week, the ECB's number two, Vitor Constancio, said the central bank would be in a position to gauge whether the previous stimulus measures are working in the first quarter of 2015. Just days prior to that, ECB chief Mario Draghi had vowed to "Step up the pressure and broaden even more the channels through which we intervene ... without any undue delay." "At the very least, we expect the ECB to indicate that it is planning more aggressive purchases in the nearer term," said Ben May at Oxford Economics.

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