The European Central Bank is set to cut its inflation forecasts because of falling oil prices and China’s economic slowdown, and it will probably promise to beef up its bond-buying programme if prospects weaken further.
The bank is expected to leave interest rates unchanged and argue that the chance of missing its medium-term inflation target has increased but the time is not yet right to take concrete policy action. It is also likely to say its $US1 trillion euro plus asset buying programme is working, albeit slowly.
The ECB launched the €60 billion per month asset-buying programme in March to boost consumer prices after a short bout of deflation.
But nearly all key price drivers have been working against its efforts to bring inflation, now running at 0.2 per cent, back to its target of just under 2 per cent.
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