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'ECB may have to print money to avoid deflation'

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The ECB may be forced to print money to fight off delation

The ECB may be forced to print money to fight off delation

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The ECB may be forced to print money to fight off delation

THE European Central Bank (ECB) 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.

One-third – 26 of 78 economists – have also pencilled in a cut in the refinancing rate from the current 0.25pc 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 US Federal Reserve, Bank of England and Bank of Japan have done.

In the last Reuters ECB survey, only a handful, 8 of 64, placed a greater than 50pc probability of such a move.

But with data pointing to a deceleration in price growth throughout the monetary union, even in number one economy Germany, and with overall economic activity languishing well below potential, that view is changing.

The ECB's primary mandate is to maintain the inflation rate at a little below 2pc, but price growth in the eurozone has averaged well below that for well over a year now

Irish Independent