ECB to ease policy as US jobs data in focus

The world’s two biggest central banks will move decisively in opposing directions in the coming week, with the ECB almost certain to ease policy on Thursday and a US jobs report likely to seal the case for a Fed rate hike in December.

The European Central Bank has all but committed itself to action, with the markets now guessing only about what exact steps it will take to kick-start price growth.

The ECB will contemplate a wide range of measures, from a fairly uncontroversial deposit rate cut to more extreme – but highly unlikely – moves such as buying rebundled non-performing loans to resurrect bank lending.

ECB president Mario Draghi has done his share to raise expectations.

He has warned about increased risks to growth and inflation, and said “we will do what we must” to raise inflation as quickly as possible.

A Reuters poll of more than 50 economists predicted that the ECB would opt for a deposit rate cut to -0.3 per cent from -0.2 per cent, an expansion of its asset buying programme to €75 billion per month from €60 billion, and an extension of that buying beyond September 2016.

While the euro area struggles with weak growth and high unemployment, the US is continuing to create jobs quickly. – (Reuters)