-Frederik Ducrozet, an economist at Credit Agricole CIB
During the last policy meeting Mario Draghi finally hinted that the ECB is planning to launch the U.S.-style quantitative easing. The President, however, did not specified when and how this unprecedented measure will be used. According to a monthly poll conducted by Bloomberg, almost two-thirds of respondents believe that the ECB will ease its monetary policy in June. Additionally, almost a half of these economists pointed out that Draghi may implement multiple measures, including rate cuts, asset purchases and long-term loans. The meeting is scheduled for June 5.
Still, the question is why Draghi is not pulling the trigger earlier? Inflation at a four-year low, almost record-high unemployment, strong Euro and sluggish growth– it seems that it is not enough for Mario Draghi to add fresh stimulus in the struggling economy. Inflation is expected to pick up in April, easing some of the pressure on the ECB. By holding off from action until June, Draghi gets a chance to see if price gains pick up as winter effect is waning.
This week, another report showed that inflation is weakening further, as France national statistics office said the costs of living increased 0.6% in the third month of 2014. Markets were betting on a 0.7% rise, while on a monthly basis, consumer prices disappointed as well.
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