The European Central Bank News - ECB's Target

ECB to stay put, keep door open for more stimulus

The European Central Bank (ECB) headquarters are pictured in Frankfurt, Germany, September 3, 2015.

The European Central Bank is likely to keep the door open for more monetary stimulus but stop short of taking new policy steps at a meeting on Thursday as it awaits fresh indications about the outlook for euro zone inflation.

Consumer prices in the 19-country euro zone fell in September, prompting calls for the ECB to expand or extend its 60 billion euros ($68.09 billion) a month of asset purchases. The program was launched in March to help push inflation back to the ECB's target of just under 2 percent.

While stressing their readiness to act, the bank's policymakers have said the fall in prices is largely due to energy costs, which the ECB cannot influence, and that it is unclear whether a slowdown in emerging economies will have a lasting impact on the euro zone.

Their cautious tone suggests the ECB will wait until it gets new inflation forecasts from its staff in December before deciding on any change to its quantitative easing scheme. 

A broader debate meanwhile appears to be taking shape within the bank about whether monetary policy is already coming up against the limits of its effectiveness.

Euro zone economic growth is slowing again, with even powerhouse Germany seeing a recent string of poor data, and one of the ECB's favored gauges of inflation expectations, the five-year, five-year euro zone breakeven forward EUIL5YF5Y=R, has fallen to 1.7 percent from 1.85 percent in July.

Lending surveys have continued to improve, however, providing some ammunition for ECB President Mario Draghi to argue that QE is finding its way into the real economy and does not urgently need to be adjusted.

Draghi has said the ECB is prepared to intervene if risks to inflation increase or financing conditions tighten, and has cited the exchange rate as a key factor for price stability.