LJUBLJANA, Slovenia (AFP) -- The European Central Bank sat down for its monthly policy meeting here Thursday, but is expected to hold its fire on interest rates and other policy moves for now, analysts said.
Holding its meeting at Brdo castle outside Ljubljana, rather than the usual venue of the ECB‘s Eurotower headquarters in Frankfurt, the bank’s decision-making governing council will keep its key refinancing or "refi" rate at the current historic low of 0.75 percent, analysts predicted.
And after unveiling the details of a revamped bond-purchase program just last month, which has since greatly helped to ease market tensions, ECB chief Mario Draghi is not expected to announce any more crisis-fighting measures, but insist it is now up to governments to act.
"We expect no change to the refi rate and no announcement of new unconventional measures," said UniCredit analyst Marco Valli.
"ECB President Draghi will acknowledge the significant improvement in market sentiment, but he is likely to keep the door open for further conventional easing down the road," the expert said.
Analysts at Goldman Sachs agreed.
"After the introduction of the Outright Monetary Transaction program last month, we expect no new announcements from the ECB this week," they wrote in a note to investors.
"We also expect policy rates to be kept on hold and no suggestion of an immediate change in policy stance," they said.
"The ECB sees the ball as now being firmly in the court of governments, while further rate cuts would only be considered if the economic situation were to deteriorate further," the economists added.
Natixis economist Cedric Thellier said that "while the governing council is certainly going to maintain (the current level of interest), it should nonetheless leave the door open for a future reduction in rates."
That further rate cut would probably come in December at the same time that the ECB published its updated growth and inflation forecasts, which are likely to show a downward revision in gross domestic product projections for
2013 and "a first projection for 2014 that should be gloomy," Thellier said.
Last month, Draghi vowed to ride to the aid of countries like Spain by buying unlimited volumes of bonds to drive down borrowing costs, sending markets soaring as investors saw a turning point in the crisis.
But after a period of calm, markets have suffered fresh volatility amid doubts over whether Spain will apply for a bailout necessary for ECB help and continued problems in Greece, the origin of the near three-year euro crisis.
"In the month since the ECB President unveiled a policy ‘bazooka’ in the form of its new OMT program, 10-year government bond yields in many peripheral economies have fallen sharply," said Capital Economics economists John Higgins and Ben May.
"But three key questions about the effectiveness of the program remain unanswered. Draghi may provide some answers at the press conference (on Thursday), although we suspect he will play his cards close to his chest.
"More importantly, we doubt the program -- even if swiftly implemented and large -- would be the game-changer that many assume," they cautioned.
Economists will be looking for more clarity on what conditions the ECB will attach to any aid, said Michael Schubert from Commerzbank, charging that the central bank had been "unclear" on the subject.
