THE European Central Bank's next monetary-policy move will be a non-standard one, economists say.
While almost three in four of them predict ECB president Mario Draghi will unveil new liquidity measures such as longer-term refinancing operations, the majority of forecasters say interest rates will remain unchanged through the first half of 2015, according to separate surveys.
The ECB, which has kept its benchmark interest rate at a record low of 0.5 per cent since May, is assessing its options for underpinning the euro area's nascent recovery as banks remain hesitant to lend.
Draghi has fuelled expectations of a fresh round of long-term loans by saying the ECB is "ready to act accordingly and as needed" to contain money-market rates.
"As long as soft indicators improve and hard data follows suit, there is no reason for the ECB to cut rates," said Carsten Brzeski, senior economist at ING Groep NV in Brussels.
"A new LTRO could kill several birds with one stone: it could solve possible liquidity bottlenecks, could lower money-market rates and, above all, would help lock in market expectations."
In the survey of 43 economists on liquidity options, 74 per cent said the ECB will unveil new measures, and 25 economists said a so-called long-term refinancing operation (LTRO) is a probable instrument.
In a separate survey of 46 economists, 89 per cent said the central bank's benchmark interest rate will stay at the current level, with the rest saying it'll be cut by a quarter point.
"There are still many banks which would probably take advantage of more liquidity from the ECB," said Cyrus De La Rubia, chief economist at HSH Nordbank AG in Hamburg.
While German and French banks are unlikely to take new long-term loans, financial institutions in debt-strapped countries are more prone to do so, he said.
The ECB has contained expectations for higher interest rates in part by pledging in July to keep borrowing costs low for an extended period, without specifying a time frame.
The share of economists saying the measure has been effective so far increased to 68 per cent from 48 per cent last month, the survey shows.
ECB executive board member Benoit Coeure said in Geneva on Wednesday the debate on further long-term loans isn't a pressing one.
"It is an important discussion to have to prepare in case we would see money-market rates being too volatile or moving towards levels not being consistent with our forward guidance," he said. Bloomberg