Keen to keep a low profile over the Greek crisis, the European Central Bank will focus on improved growth prospects on Thursday and unveil some but not all the details of its 1 trillion euros-plus bond buying plan.
The ECB, which left interest rates on hold at record lows at its meeting off-base in Cyprus, will probably lift growth forecasts to reflect a string of positive data surprises.
But it could cut inflation projections as it incorporates the full effect of a dramatic oil price fall, backing its case to buy 60 billion euros worth of bonds a month from March to spur inflation.
The bank has a long way to go to convince markets its plans will be effective. Only half of the economists polled by Reuters think bond buying will help inflation rise towards the target of close to but below two percent and half think the purchases will be extended beyond September 2016.
The ECB has said its money printing would last "at least" until September 2016 and until a "sustained adjustment" in the inflation path emerges. Markets will be looking at updated economic forecasts from the ECB's staff with keen interest.
There are at least tentative signs inflation has bottomed out.
The February reading at -0.3 percent was above forecasts, oil prices have rebounded from January lows, growth is picking up and the euro hit a fresh 11-year low against the dollar overnight, boosting prospects for higher imported inflation.
The bank could forecast deflation for 2015, sharply cutting its 0.7 percent inflation projection from December but some analysts said the actual figure could end up in positive territory, also getting a boost from the ECB's bond buying.
Markets will be looking for how quantitative easing will work, when the buying will start, whether it applies to paper with negative yields and how the purchases will be distributed along the yield curve.
Anticipation of the QE programme has driven euro zone borrowing costs down to the point where Spain can borrow for 10 years at under 1.3 percent and investors actually pay for the privilege of lending to Germany for five years. Yields in Italy, Spain and Portugal dropped to record lows this week.
Another concern is whether the ECB will find enough bonds to buy as the market is flush with uninvested cash while banks are under obligation to hold top tier assets, like government debt.
The buying will start just as European economies appear to have turned a corner. ECB Executive Board member Peter Praet has already said the bank will likely lift its growth forecasts.
Fourth quarter growth beat expectations, recent consumption figures, particularly in Germany, have exceeded forecasts, sentiment indicators have turned up while growth is also poised for a boost from lower energy prices and a weaker euro.
Although struggling Greece will remain a headache, the ECB is desperate to stay out of the political debate over the country's future and the return of deposits to Greek banks since Athens secured an extension to its financial rescue last month has eased pressure on the bank to act. (Reuters)
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