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Eyes on ECB to up stimulus
October 18, 2015, 9:03 pm

It's deja-vu all over again as markets wonder whether Draghi will or won't announce beefing the eurozone stimulus program [Xinhua]

It’s deja-vu all over again as markets wonder whether Draghi will or won’t announce beefing the eurozone stimulus program [Xinhua]

When the European Central Bank (ECB) convenes for its October meeting in Malta on Thursday, its governing council won’t only be under pressure to determine whether new stimulus mechanisms are necessary to boost the continent’s economies, but also to overcome internal differences.

There have been calls for the ECB chief Mario Draghi to fulfill his pledge to increase quantitative easing if market data proves that monetary policy is not working fast enough to pull the continent out of deflation and toward stable economic growth.

But there are other’s within the council who feel that the ECB should wait a little bit longer before altering monetary policy.

The European Union’s statistics bureau Eurostat said that inflation in the 19-member eurozone had fallen into negative territory for the first time in six months to -0.1 per cent in September.

It stood at 0.1 per cent in August.

The latest figures could put pressure on the European Central Bank (ECB) to increase its quantitative easing stimulus program which began last March.

Draghi had also pledged when the stimulus program kicked off in March that he would consider extending it beyond its September 2016 deadline.

Many analysts now believe that to be necessary, saying inflation and GDP growth won’t pick up quickly enough by next year.

Although European markets have performed better in the past three weeks, low energy and oil prices have led to a shortfall in cash. Deflation and rampant unemployment in the eurozone, coupled with dropping manufacturing data signal that the eurozone is not in the best of health.

Even Germany, the core of European economic strength, appears to be limping.

Last week, the German Federal Statistics Office said that seasonally-adjusted exports retracted by 5.2 per cent to $109 billion month-on-month, marking the sharpest drop in almost six years.

Imports also slid by by 3.1 per cent to $88.2 billion, marking the sharpest one-month drop in nearly three years.

It took Draghi nearly nine months of ‘ahems’ and ‘uhms’ before he firmly committed to a monetary policy change.

Markets are now hoping that the ECB will announce at least an extension to the current stimulus program before the end of the year.

The BRICS Post with inputs from Agencies

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