|Draghi likely to sing the same tune at ECB's Paris policy meeting
The European Central Bank, at its monthly policy meeting today, will hold fire on interest rates but will keep a close eye on liquidity in the euro zone, analysts said.
The ECB's governing council is convening in Paris rather than the bank's Frankfurt headquarters. And the meeting has been brought forward to Wednesday as a result of the national public holiday in Germany on Thursday.
ECB watchers are confident that central bank chief Mario Draghi (pictured) will not announce any moves in interest rates or other policy measures, even if markets may be worried about future liquidity provisioning, AFP reports.
There is “no need for the ECB to change its tune,'' said Berenberg Bank economist Christian Schulz.
“The euro zone recovery is picking up a bit more pace. Economic sentiment indicators have risen further.''
However, inflation has fallen further and “substantial downside risks remain,'' Schulz cautioned.
Draghi and other policymakers “have emphasized that the euro zone is at a very early stage of recovery. The ECB will make sure not to tighten policy prematurely,'' he said.
Money market rates have risen recently amid concern about liquidity while economic recovery still remains fragile.
At the bank's last meeting, Draghi said the ECB was “particularly attentive'' to such developments.
New ECB data last week showed that lending to businesses in the debt-mired euro zone is continuing to contract sharply.
The ECB already flooded euro zone banks with more than 1 trillion euros in cash via two long-term refinancing operations (LTROs) at the end of 2011 and the beginning of 2012 in a bid to avert a potentially disastrous credit crunch.
And Draghi told a hearing at the European Parliament in Brussels last week that another LTRO could be on the cards.
But ECB watchers believe any more liquidity measures will not come just yet.
Newedge Strategy analyst Annalisa Piazza said: “No changes in the current ECB policy mix are expected this week.
“Looking at recent data, it looks like a gradual recovery is confirmed in the third quarter and there is no need for further accommodation in ECB policy in the near term. That said, Draghi and other ECB members have often pointed out that the governing council is keeping a close eye on liquidity conditions. And further emphasis on this subject will be put at the meeting,'' Piazza said.