ECB Preview: More easing before year-end

The ECB will hold its regular monetary policy meeting next week on Thursday, 3 September. Since the last policy meeting in July, there have been several macroeconomic and financial factors that have reduced the near- and medium-term inflation outlook and tightened overall financial conditions. The ECB staff macroeconomic projections are likely to show a downward revision in inflation forecasts for both 2015 and 2016, resulting from a stronger euro and weaker oil price futures.

"Therefore, we expect President Draghi to maintain an accommodative stance during his introductory statement, likely insisting that the Governing Council still has tools available should monetary and financial conditions tighten further", says Barclays.

 Further easing is expected to be announced before year-end as inflation is unlikely to return to levels consistent with the ECB's objective of price stability over the next two years. A time extension of the asset purchase programme to beyond September 2016 is the most likely option.

"In our view, and we think it could be decided as early as next week. Other options include an extension of the size and the scope of asset purchases and a cut in the deposit rate - the latter would be the most effective against a strong euro, in our view, but we do not expect such announcements next week, although the Governing Council will probably start discussing these options", added Barclays.