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The European Central Bank is expected to hint at fresh stimulus measures to ward off the threat of deflation when it holds its next monetary policy meeting on Thursday.  This week’s gathering takes place in Malta, under the governing council’s policy of occasionally departing from its Frankfurt HQ to visit other areas of the eurozone.  But although the location will be different, the event will be dominated by familiar concerns after the region’s inflation rate fell below zero last month, to -0.1%, for the first time since March.  City economists predict that ECB president Mario Draghi will repeat his pledge from September to add more stimulus if needed. However, few expect decisive action this week.  “The ECB’s October meeting is for watching. Draghi’s message will be dovish, but it’s not time to act yet”, said Holger Sandte, chief European analyst at Nordea Bank.  The ECB is currently committed to buying €60bn (£40bn) of government and corporate bonds each month until September 2016, in an €1.1tn attempt to stimulate growth, inflation and bank lending.  But last week, ECB policymaker Ewald Nowotny declared that it was “quite obvious” that additional instruments would be needed, as the ECB is now “clearly missing” its inflation target.  Nowotny’s comments mean that “further ECB stimulus as soon as next Thursday certainly cannot be ruled out,” said Howard Archer of IHS Global Insight.  Capital Economics’s Jonathan Loynes said that ECB will boost its QE firepower €80bn a month in December, but does not totally rule out an announcement this week.
The eurozone’s return to negative inflation is driven by cheaper energy costs, which fell 8.9% year-on-year following the tumble in oil prices. This countered a 1.2% rise in service sector prices, and a 1.4% rise in food, alcohol and tobacco costs.