Mario Draghi’s promise that the ECB is willing to step up its stimulus if needed is resonating with economists, who see the eurozone recovery as too shallow to be sustained.
More than two thirds of respondents in a Bloomberg survey predict the ECB’s president will expand or extend the €1.14trn quantitative-easing programme, and almost all of those say he will do so within nine months.
While an increasing number of respondents see the economy improving for now, they are also fretting that the upturn will not last long.
The ECB’s governing council has already shown concern that a slowdown in global trade will erode exports, a pillar of the regional recovery, before domestic demand is strong enough to compensate.
The central bank this month cut its growth and inflation forecasts and Mr Draghi told reporters that quantitative easing is flexible in size, duration and composition. In contrast, the Federal Reserve may raise its interest rates this week.
“Quantitative easing risks becoming a semi-permanent feature,” said Gianluca Sanna, a portfolio manager at Banca Monte dei Paschi di Siena in Milan.
“While it’s certainly true that the eurozone is going through a phase of decent, maybe even above- potential, output growth, chances are that there is nothing self-sustaining in what we are seeing right now and the eurozone ends up again in a low-growth environment with inflation dangerously close to zero,” said Mr Sanna.
In the survey, 68% of the 41 economists polled said the ECB will step up its quantitative easing programme. Of those who gave a timeline, 65% predict an announcement by December and 87% see a commitment to more stimulus by March.
As of September 11, the ECB had settled public-sector bond purchases worth €314.5bn, and spent €116.1bn on covered bonds and €11.9bn on asset-backed securities.
The Frankfurt-based central bank has other options, though with less control over their scale.
The fifth round of its targeted long-term loans to banks — aimed at rekindling lending to companies and households — will take place next week.
Growth is returning, if unevenly. Figures published yesterday showed industrial production rose 0.6% in July, twice as much as economists predicted, as output jumped in Germany, Spain, and Italy, while declining for a second month in France.
The share of economists saying the region’s short-term outlook will improve rose to 32%, compared with 28% last month. Only 5% said prospects will deteriorate.
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