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Keeping Rates Firmly on Hold, ECB May Raise Inflation Forecast

Posted by Chris Advincula on Jun 2, 2016 6:33:20 AM

(Jun 2 Reuters) Keeping interest rates firmly on hold, the European Central Bank will likely raise growth and inflation forecasts on Thursday, a rare positive step even as it emphasizes persistent negative risks and a readiness to provide more stimulus.

The ECB is buying assets to the tune of 1.74 trillion euros ($1.94 trillion) to lift growth and boost inflation, which has been stuck in negative territory for months, raising the risk the 19-member currency bloc sinks into a deflation spiral.

With oil prices almost doubling since early January the ECB will nudge up its inflation projections, breaking a cycle of having to cut forecasts quarter after quarter, and supporting ECB President Mario Draghi's call for patience with measures already taken.

Indeed, corporate bonds buys, announced in March, will only start in June, and the first allotment of ultra cheap loans is not due until later this month, indicating that more stimulus is already in the pipeline and supporting an argument by some policymakers for the ECB to stay on the sidelines at least until autumn.

Meeting in Vienna, the ECB will announce its rate decision at 11:45 before Draghi's news conference at 12:30 GMT. All 65 analysts polled by Reuters expect rates to stay unchanged and the vast majority see them on hold for the rest of the year.

Click on the link below to see the full story from Reuters: (by Francesco Canepa & Balazs Koranyi)

Keeping rates firmly on hold, ECB may raise inflation forecast 

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Topics: EURUSD, EURO, Forex Market, Forex Fundamentals, ECB monetary policy

 

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