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Low inflation builds case for ECB easing

Wednesday, December 02, 2015 - 01:33

Euro zone inflation rose very slightly in November, but is still barely above zero. As David Pollard reports, it's certainly unlikely to stop the European Central Bank from easing monetary policy further on Thursday.

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Even those too old for Santa might still believe in Mario Draghi. Traders - even the most jaded of them - expecting an early Christmas present from the ECB chief. European stocks at a three-month high as they price it in. Baader Bank's Robert Halver. (SOUNDBITE) (English) ROBERT HALVER FROM BAADER BANK, SAYING: "It's very good news for the German stock exchange. The liquidity-driven rally goes on and of course cheaper money is helpful for the economy. Most predict a deposit rate cut and a boost to the ECB's asset-buying programmes this Thursday. But there is a contrarian view. Record low German unemployment perhaps one reason why the ECB shouldn't ease. The latest euro zone manufacturing figures - described by many as 'not so bad' - another. Justin Urquhart-Stewart of Seven Investment Management. (SOUNDBITE) (English) JUSTIN URQUHART STEWART, HEAD OF CORPORATE DEVELOPMENT, SEVEN INVESTMENT MANAGEMENT, SAYING: "If I were him, I wouldn't use any more gunpowder for the time being. I would reserve it till year, because I fear at the moment things are going OK, but it's growth, it's slower growth around the world. So I fear that we may be looking at next year not so much a world economy that stops, but actually one which looks a lot more sluggish. That's when he'll need the extra QE money, to provide some fire power then." Inflation, though - or the lack of it across the euro zone - may well clinch the case for easing. The latest reading lower than expected. And factory gate prices sharply negative on the year. On the plus side for the ECB, euro dollar's at a seven-month low. If the Fed hikes as expected this month, parity's seen as distinctly possible. A lower currency a boost to exports - and a welcome festive gift for Draghi.

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Low inflation builds case for ECB easing

Wednesday, December 02, 2015 - 01:33