The ECB maintains its policy unchanged and maintains the course to fight the stimulus

FRANKFURT (Reuters) – The European Central Bank has kept its policy unchanged as planned on Thursday, staying on track to end bond purchases this year and raise rates next autumn as protectionism

With inflation rebounding and growth stabilizing at a relatively steady pace, the ECB is slowly eliminating stimulus measures for months, convinced that a range of risks from protectionism to emerging markets and Brexit turbulence will not be enough sixth year.

Modifying only slightly its political stance, the ECB said it would halve its monthly purchases of bonds to 15 billion euros from October, reinforcing its previous position, saying only that such decision was anticipated.

But it has maintained its position that bond purchases should end at the end of the year and that interest rates will remain unchanged until at least next summer. Some analysts believe that the unusually long horizon of policy direction will leave the bank on autopilot for months.

Attention is now focused on ECB President Mario Draghi's press conference at 12.30 GMT, where he will detail new growth and inflation forecasts and raise questions about the growing risks. for the prospects. He could also discuss how the ECB will reinvest maturing debt liquidity as part of its € 2.6 trillion bond purchase program.

Even if economists focus on risks, Draghi should insist that the expansion is strong enough to absorb unused capacity and generate inflation, even if

It is also likely that wage growth will improve, bolstering the bank in the hope that inflation will slowly but surely rise towards the target.

The ECB kept rates in negative territory for years and bought more than 2.5 billion euros of debt, which lowered borrowing costs and boosted economic growth after a double-dip recession.

Although the regime appeared to be working, inflation is rising more slowly than expected and much of the ECB's firepower has been depleted, leaving it with few tools to fight the next recession.

OPTIMISM?

Despite Draghi's optimism on growth, the bank is expected to trim some of its forecasts after a series of weak numbers over the summer, according to a Reuters survey of economists. Even leading indicators suggest that growth should at best stabilize rather than rebound after a weak start to the year.

Draghi will also face questions about fiscal prudence in Italy, where a populist government is considering challenging the EU's spending rules. Such a risk from one of the weaker members of the Union as a whole has kept bond markets volatile, increasing the risk of persistent turbulence.

The new growth forecasts, however, are expected to be only slightly lower than forecast in June, and inflation expectations are broadly stable, supported by higher energy costs and low wage pressures.

Draghi could also provide more details on how the ECB will reinvest the maturing debt funds, although sources close to the discussion said that these decisions will not have a significant impact on the policy,

With the decision on Thursday, the deposit rate of the ECB, currently its main interest rate tool, will remain at -0.40% while the main refinancing rate, which determines the cost of credit in the economy, will remain at zero.

Graphic: Does QE work? – reut.rs/2oyAuEN