FRANKFURT: The European Central Bank may have to consider fresh policy measures to prevent deflation in the single currency area, but will not move at its meeting Thursday, analysts said.
"After all the Greek excitement over the summer, the ECB had probably been hoping for a very ordinary and dull meeting this week; to slowly move from vacation into business mode," said ING DiBa economist Carsten Brzeski.
"Unfortunately, financial markets did not meet the ECB's wishes. Latest market turmoil and, above all, the plunge in commodity prices should revive the deflation debate within the ECB's governing council," he said.
While Brzeski was confident that ECB chief Mario Draghi would not announce any new policy action Thursday, "on the back of lower inflation projections and increased uncertainty, Draghi will -- in our view -- open the door for stepping up QE," or the contested bond-purchase programme known as quantitative easing, he said.
UniCredit economist Marco Valli agreed.
"We expect no policy change at Thursday's meeting," he said, but suggested market attention would likely focus on any downward revisions to the ECB's inflation forecasts and increased uncertainty about the implications for the eurozone from developments in China.
Draghi "is likely to sound more dovish than he did in July... We do not expect any explicit hint that the ECB is reconsidering its policy stance at this stage, but the door for further stimulus remains wide open," Valli said.
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