By Nigel Davies
LONDON, June 24 (Reuters) - The European Central Bank will leave interest rates at a record low through most of next year but will not launch any further measures to fight a recession that now appears to be easing, a Reuters poll found.
Eighty-one of 82 economists in a poll taken June 22-24 said the ECB would leave the refinancing rate at a record low of 1.0 percent when it meets on Thursday July 2, following the bank's judgement that level was appropriate for now.
One said the ECB would cut the refi rate to 0.75 percent.
While the worst recession in decades grips most countries in the euro zone bloc, benchmark rates were unlikely to change until the last quarter of 2010, the survey median showed.
That was despite the OECD on Wednesday urging the ECB to cut rates again as disinflationary pressures gathered. While most analysts did not forecast further cuts they did say it was not yet time for the bank to unwind its accommodative monetary policies.
"We expect the ECB to enter a 'wait-and-see' approach," said said Juergen Michels at Citi. "The (Governing) Council is unlikely to change its controversial view regarding the low risk of deflation and the non-existence of a credit crunch."
Earlier on Wednesday euro zone banks secured a massive 442 billion euros in the ECB's first ever one-year refinancing operation, more than the 300 billion expected in a Reuters poll, its latest attempt to push banks into lending to businesses. See
But analysts were convinced that the ECB will not increase the size of its planned purchases of up to 60 billion euros in covered bonds in an attempt to stimulate bank lending. Fifty-one of 66 said it would not do so.
Neither were analysts convinced the plan would actually have its desired effect. Thirty-two of those polled said it would have only a 'neutral' effect on markets, while 29 said it would be effective. Seven said it would be ineffective.
The bank would have been encouraged by surveys such as the purchasing managers indexes and Ifo which have pointed to an easing in the recession in the last month.
Yet there is a long way back for the euro zone economy to actually grow again, which most say will not happen until the last quarter of the year. See
"We are still in the downturn phase -- a downturn that globally is proving to be the deepest since the Second World War," said ECB President Jean-Claude Trichet on Monday. While forward-looking economic indicators have painted a better picture in the second quarter, lagging indicators such as industrial production fell by over 20 percent in the euro zone in April and unemployment is nearing 10 percent.
TOO EARLY TO EXIT?
An expected recovery next year has already got governments and central banks alike thinking of how to reverse out of the ultra-loose monetary policies set up to deal with a heavy recession.
A majority of economists, or 38 of 63, said it was not yet time given that the recession is still very deep, while 25 said it should start planning.
"It's just too early. We are past the worse in terms of contraction, but the upturn in the euro zone has been less pronounced than in the U.S. or UK so the people who should be thinking least about an exit strategy are the ECB," said Dominic Bryant at BNP Paribas.
ECB policymakers have offered differing opinions on how to back out of its measures. On Tuesday Governing Council member Christian Noyer said the bank was not preparing to unwind its support for the economy, but it will be ready to withdraw liquidity gradually when the time comes.
But Executive Board member Juergen Stark has said the ECB will reverse its low rates when the recovery starts and price pressures emerge. In any case, economists have not moved far from the view that rates will be left on hold for a long time. Just 12 of 78 in the survey said rates will be higher than their current level this time next year.
(Polling by Bangalore Polling Unit; Editing by Victoria Main)