Frankfurt--The stage is set this week for the European Central Bank to unleash its biggest weapon yet in the battle against deflation in the eurozone, analysts said.
Financial markets and ECB watchers are betting that central bank chief Mario Draghi will unveil a programme of sovereign bond purchases known as quantitative easing (QE) at the first policy meeting of this year on Thursday.
With area-wide inflation turning negative in December -- consumer prices fell by 0.2 percent across the single currency region -- the alarm bells have been ringing, and Draghi and other top ECB officials have been busy priming the markets for action.
Draghi said the bank had few other options at its disposal to counter the risk of deflation, a dangerous downward spiral of falling prices.
And ECB executive board member Benoit Coeure said in multiple interviews that the central bank's governing council would debate the size of such a programme this week.
"The ECB will no doubt make good its promises and announce broad-based government bond purchases," said Commerzbank economist Michael Schubert.
IHS Global Insight analyst Howard Archer agreed.
The inflation numbers "sustain the massive pressure on the ECB to pull the QE trigger" on January 22, he said, even if it was "not 100-percent certain" that it would do so just yet.
AFP
