Uh-oh — European economists increasingly want the European Central Bank to follow the lead of former Federal Reserve Chair Ben Bernanke.
With all the indicators pointing to a slowing of price appreciation throughout the European Union, and an overal lackluster level of economic activity, more and more want to fire up the printing presses.
(Reuters) – The European Central Bank may be forced to print money this year to fight off deflation risks and boost what remains very fragile economic growth, according to a growing minority of economists polled by Reuters.
A third – 26 of 78 economists – have also penciled in a cut in the refinancing rate from the current 0.25% at the ECB's March 6 meeting. Most expect a reduction of 5 to 15 basis points mirroring the Bank of Japan's interest rate moves.
That is the strongest view for an easing in policy in Reuters polls since November last year when the ECB surprised markets by cutting the benchmark rate by 25 basis points.
But most agree that the ECB has nearly run out of options with rates and will need to look to more aggressive policy measures, such as purchasing sovereign bonds as the U.S. Federal Reserve, Bank of England and Bank of Japan have done.
Although still a minority view, 19 of 63 economists polled this week expect the central bank eventually to launch its own version of such stimulus and expand its balance sheet.