Draghi building united front for ECB push against deflation

By Jana Randow

Mario Draghi is building a united front for the European Central Bank’s next big push should the threat of deflation turn into reality.

With consumer-price gains at just a quarter of the ECB president’s goal, officials are rallying behind even the most controversial tool available -- quantitative easing. The endorsement by Bundesbank President Jens Weidmann of bond purchases and a negative deposit rate, even if their immediate use is unlikely, shows policy makers are determined to take whatever steps are needed to prevent Japan-style deflation.

As ECB officials gather in Frankfurt on Thursday for their monthly interest-rate decision, Draghi must judge whether the factors curbing prices are temporary or pose such a fundamental threat to the recovery in the 18-nation euro area that they require immediate action. Policy makers refrained from cutting rates in March, even as ECB forecasts showed inflation staying below target through 2016, and economists surveyed by Bloomberg say they’ll stay on hold again this month.

“Many would argue that the inflation outlook in particular has been bad enough for a long time already to justify more ECB action,” said Greg Fuzesi, an economist at JPMorgan Chase & Co. in London, who forecasts rates will stay unchanged. “We view the recent comments by Weidmann on QE and a negative deposit rate as helpful as they allow Draghi to threaten action more credibly.”

The ECB will announce its interest-rate decision at 1:45 p.m. in Frankfurt and Draghi will hold a press conference 45 minutes later. All but three of 57 economists in a Bloomberg News survey predict borrowing costs will stay unchanged at 0.25 percent. Credit Agricole SA and Danske Bank A/S forecast a cut to 0.15...