ECB unlikely to surprise the market with policy easing in January meet

The ECB will not rush in policy easing in January meet amid declining oil prices and low longer-term inflation expectations. It will be a huge surprise to the market if the ECB announced new measures at the January meeting.

There are various reasons why it would be a big surprise - firstly, the ECB rarely reacts to market volatility unless it is has prolonged or has clear effects on the real economy and business confidence; secondly, the bank is also unlikely to ease soon again following the recent easing measures and thirdly continuous drop in the oil prices has not raised the inflation expectation.

Draghi is expected to be dovish at the forthcoming meeting in January and reiterate the message that the Governing Council is willing and able to act by using all the tools available within its mandate, in order to maintain adequate monetary accommodation.