ECB to decide on bond-buying plan for reviving euro zone economy
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FRANKFURT (Reuters) - The European Central Bank is poised to announce a plan on Thursday to buy government bonds, resorting to its last big policy tool for breathing life into the flagging euro zone economy and fending off deflation.
Market expectations are sky-high for the ECB to unveil a large-scale programme of quantitative easing (QE) - printing money to purchase the sovereign bonds - despite opposition from Germany's Bundesbank and concerns in Berlin that this could allow spendthrift countries to slacken their economic reforms.
A euro zone source said on Wednesday that the ECB's Executive Board, which met on Tuesday, has proposed that the bank should buy 50 billion euros ($58 billion) in bonds per month from March.
The broader, 25-member policymaking Governing Council began meeting at 0800 GMT on Thursday to discuss the proposal. ECB President Mario Draghi holds a news conference at 1330 GMT.
"I expect they will deliver, and launch a QE programme that will be probably larger than 500 billion (euros)," said Sassan Ghahramani, CEO of New York-based SGH Macro Advisors, which advises hedge funds.
Uncertainty surrounds the proposed programme's duration. The Wall Street Journal reported it would last a minimum of one year while Bloomberg said the purchases would run until the end of 2016. The ECB declined to comment on any of the reports.
The duration is significant. A programme starting in March and running for a year would total about 600 billion euros, based on a purchase rate of 50 billion per month. If a similar plan ran until the end of 2016, it could surpass 1 trillion euros.
A Reuters poll of money market traders on Monday showed they expected a 600-billion-euro bond-buy plan, though they also believed that would not be enough to return inflation to target.
Euro zone inflation turned negative last month; consumer prices fell 0.2 percent, far below the ECB's target that they should rise just under 2 percent annually.
