By Sumanta Dey
(Reuters) - It is now almost certain the European Central Bank will ease monetary policy in December, increasing or extending its stimulus programme and further cutting the deposit rate, a Reuters poll of economists found.
ECB President Mario Draghi last week signalled that the Governing Council would act if needed to ensure inflation rose to its target of near 2 percent from -0.1 percent in September.
Draghi's words have firmed up expectations. The consensus from almost 60 economists in a snap poll conducted after Thursday's meeting shows there is an 80 percent probability of the ECB easing at the next policy review on Dec. 3.
Since March, the ECB has been buying 60 billion euros (43 billion pounds) a month worth of mostly sovereign bonds and currently expects to keep doing so until September 2016 to lift inflation, spark credit growth and boost the economy.
But with the stimulus programme having little success so far - prices are falling, while private lending is yet to rise substantially - what new steps the ECB would take and whether they would help is unclear.
"An extension (beyond September 2016) only would be a disappointment and would have little immediate effect on monetary conditions," said Ken Wattret, economist at BNP Paribas (PA:BNPP) in London.
"We expect a stepping up of the monthly run-rate in addition to an extension. The probability of a package of measures, including a lower deposit rate, has clearly increased based on what was said at the press conference."
A majority of economists who answered other questions said the ECB would lower the deposit rate from the current -0.20 percent to -0.30 percent, while also increasing the amount of its monthly asset purchases and extending its duration.
Cutting the deposit rate further would effectively increase the amount banks have to pay to park cash overnight with the ECB.
The median consensus is for the ECB to ramp up bond buying to 75 billion euros ($83 billion) a month, while responses on how long the ECB would extend quantitative easing ranged from December 2016 to the second half of 2019.
"The decision may also hinge upon what the U.S. Federal Reserve does. If the Fed indicates it will hike in December and thus the euro weakens, a deposit rate cut will be deemed unnecessary by the ECB," said Elmar Voelker at LBBW.
A separate poll this month showed economists still expect the Fed to hike interest rates in December for the first time in nearly a decade, although that conviction was wavering. Markets bet the Fed will not move until well into 2016. [ECILT/US]
Prospects of a Fed rate hike have weighed on the euro, weakening it nearly 9 percent since January and helping the euro zone import some inflation. But the euro's course over the coming year hinges closely on rates in the U.S. and the dollar.
Still, for the ECB's stimulus to have any meaningful impact on inflation, a lot depends on factors it has little control over; higher oil prices and increased demand for credit from businesses and consumers.
Private lending in the euro zone rose just 0.6 percent in September compared with a year ago, data on Tuesday showed, while business lending climbed 0.1 percent.
(Polling by Kailash Batijha and Khushboo Mittal; Editing by Hugh Lawson)