Mario Draghi’s month-long audit of the euro-area economy has entered a critical phase as officials prepare forecasts and data show whether inflation (ECCPEST) is becoming too scarce for comfort.
With 10 days left for the European Central Bank president to make up his mind before the next policy decision, reports from rising German sentiment today to region-wide statistics at the end of the week are among pieces he can add to the puzzle of the outlook. Figures on Feb. 28 will probably show inflation remained at less than half the ECB’s goal.
On Feb. 6, Draghi cited the need for “more information” to explain why the ECB hadn’t added more stimulus yet, heralding a month of scrutiny on data that have veered between growth outperforming economist forecasts to a deterioration in survey indicators. He repeated yesterday that officials are “ready to take any action,” setting the scene for a showdown next week as they determine if the economy’s prospects are sickly or safe.
“We believe that the doves still have a clear majority” on the ECB’s Governing Council, Citigroup Inc. economists including Guillaume Menuet in Londonsaid in a note today. “Given the need to provide maximum stimulus, particularly in the absence of much momentum in private-sector credit flows, high unemployment, muted recovery dynamics and a likely new low” for inflation, “we expect a rate cut in March.” Source: Reuters.