Preparing for a change? EBC meeting in focus

The European Central Bank is gathering on June 8 for a new monetary policy meeting and things are looking a bit more promising this time, according to economists.

Nope, we’re not talking about interest rate moves. Optimism is now pointing directly to the ongoing quantitative easing program of the European regulator.

That’s right, despite recent improvements on inflation and labor market conditions, the ECB continues to disburse 60 billion euros on monthly basis to purchase government and corporate bonds in order to boost regional economies. But that could be about to change.

“Overall we (policymakers) remain firmly convinced that an extraordinary amount of monetary support is still necessary,” said ECB president Mario Draghi in a recent statement.

Draghi has been defending the idea that a loose policy stance is still required from the European regulator to ensure economic stability in the bloc and that the QE program “will stay in place until we see a convergence in the rate of inflation”.

According to the ECB leader, inflation reaching 1.9 percent this year is the result of temporary factors such as the rebound of crude oil prices, which led to higher energy prices.

Nevertheless, economists polled by Reuters and Bloomberg are saying the time has come for euro policymakers to sit down and take a look at how things will look without quantitative easing.

But don’t be too anxious, it’s almost certain that no decision will be taken this month. Instead, traders are expecting a slight rotation on the rhetoric to a more normalization-friendly approach.

ECB authorities could say that economic risks are now balanced, using that argument to stop the reference to lower interest rates in further communication.

With EU’s first quarter gross domestic product at 0.5 percent, cheered market players are looking at the best growth rate since the 2008 crisis and asking themselves a common question, when and how the ECB plans to revert stimulus and take its monetary policy back to normal?