Saturday, February 28, 2015   

Europe benchmarks steady in anticipation of unchanged ECB policy stance
(04-03 15:52)

Europe's main stock markets opened steadily ahead of the European Central Bank's latest monetary policy meeting in Frankfurt, Germany.
Frankfurt's DAX 30 nudged down 0.03 percent to 9,620.87 points and the CAC 40 in Paris was flat at 4,431.11 points. London's FTSE 100 index was up by 0.11 percent in value to stand at 6,666.13 compared with Wednesday's closing values.
The ECB is likely to hold interest rates at current levels although the most recent inflation readings indicated a new low, analysts believe.
Euro zone inflation fell to 0.5 percent in March, data showed this week, the lowest rate since the financial crisis, stoking fears the bloc could be heading for a damaging cycle of deflation.
ECB prefers to maintain inflation just below 2 percent.
An IMF official said in London recently that ‘low-flation’ was a concern and that the ECB could go down the easing path.
“Another sharp fall in inflation in March has put the ECB's inflation forecasts at risk and increased the chance of further monetary stimulus. However, as the recovery has strengthened and broadened this winter, we expect the ECB to maintain its stance,'' said Berenberg Bank economist Christian Schulz.
ECB officials have repeatedly said they see no threat of deflation, even if president Mario Draghi has reiterated that the central bank stands ready to act if necessary.
UniCredit economist Marco Valli also believes the ECB would “remain on hold with regard to both conventional and unconventional policy.’’
The slowdown in inflation “is unlikely to be a trigger for action, as temporary factors played a major role in this deceleration. In April, inflation will most likely rebound, and the ECB will be aware of that,'' Valli said.
“At the policy-relevant horizon, the central bank's price outlook is likely to remain on track.''
Annalisa Piazza at Newedge Strategy said: “Recent data have been relatively encouraging, confirming that the moderate recovery is proceeding in line with the ECB baseline scenario.’’
Piazza predicts a “modest'' chance that the governing council could cut the bank's key “refi'' rate – currently at 0.25 percent – by 0.10-0.15 percentage point.
“But our baseline scenario is for unchanged policy stance,'' she said.
Should that be the case, “Draghi is expected to reiterate that the euro zone needs a high degree of accommodation and that the ECB stands ready to act,'' Piazza said.

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