Mar 04, 2016 | Post by: Roman Chuyan, CFA Comments Off on Will The ECB Awe Or Disappoint?

Will The ECB Awe Or Disappoint?

Investors will be watching the European Central Bank’s monetary policy meeting on Mar 10th. The ECB’s fight against deflation using negative ECB deposit interest rate (now at -0.3%) and a 1.5 trillion-euro bond-buying plan has made little visible progress: economic growth and inflation remain absent from the Eurozone.

Finance authorities are starting to realize that monetary policies have little potential left in them. Global finance leaders, in the official communique from the G-20 meeting in Shanghai on February 27, 2016 agreed that “Monetary policies will continue…, but monetary policy alone cannot lead to balanced growth… we will use fiscal policy flexibly to strengthen growth…”

But investors are still looking to Mario Draghi to provide ever-increasing monetary stimulus on Mar 10th. Expected measures include a deposit-rate cut by at least 10 bps (to -0.4%), an increase of at least 10 billion euros in monthly asset purchases and an extension of the program, economists and strategists say. As investors were disappointed in December (which led to the January market plunge), I think that they may be disappointed again on March 10th.

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