THE European Central Bank (ECB) will roll out its big guns at its monetary policy meeting this week, ramping up its trillion-euro asset purchases and cutting key rates to hike weak inflation, analysts said.

    Fed up with an inflation rate that is stubbornly far below the target of close to 2.0 percent, ECB chief Mario Draghi has in recent weeks multiplied pledges to “do what we must” to lift consumer prices in the 19-member eurozone.

    In what was viewed as an attempt to lay out his case for more stimulus, Draghi also presented a morose state of the economy at a banking conference earlier last month.

    “We cannot yet say with confidence that the process of economic repair in the euro area is complete,” he said, noting that global growth is expected to be the weakest since 2009 while the rebound in the eurozone is the lowest since 1998.

    For Jonathan Loynes, an analyst at Capital Economics, “the question is not whether the ECB’s governing council will loosen monetary policy at its meeting Dec. 3, but rather whether it will do so decisively enough to meet the very strong expectations stoked up by its own dovish signals.”

    “Anything less than a marked acceleration in the pace of its monthly asset purchases and a significant cut in its deposit rate would now come as a severe disappointment,” he said.

    The ECB launched in March a 1.1-trillion-euro (US$1.2 trillion) scheme to help lift consumer prices.

    The quantitative easing program to buy sovereign bonds at a rate of 60 billion euros a month runs until at least September 2016, but inflation came in at zero in October.

    At the ECB board’s last meeting Oct. 22, the question of whether to cut interest rates again surfaced as a potential tool to boost consumer prices.

    The ECB had cut the rate on its deposit facility — that is, for funds placed by banks at the central bank, to negative 0.2 percent in June 2014.

    That means banks have to actually pay the central bank to hold their cash, thus encouraging them to lend. The rate has remained at that level since.

    Draghi’s expansionist stance is not without detractors, with Bundesbank president Jens Weidmann warning against hastily boosting stimulus rather than letting the current package do its work. But the dissenters “appear to have had little influence on their colleagues,” said Loynes.

    Berenberg analyst Holger Schmieding also said that “experience tells us that the ECB council usually follows Draghi’s lead in such contentious discussions”.

    “With no inflation risks whatsoever, a further stimulus would certainly do no damage even if the benefits may not be very pronounced either,” he said.

    (SD-Agencies)