Dec 5 - New projections from the European Central Bank will probably point to euro zone inflation remaining below target into 2015, raising pressure on the bank to take fresh action. With unemployment up in France and industrial output down in Spain the backdrop isn't looking good. David Pollard reports
His panoply of tricks have earned him the nickname Magic Mario. Last month he pulled a monetary rabbit out of a hat with a quarter percent cut in the main ECB rate. This time: no cut - and less of a flourish, more of a pause to assess where the euro zone is now with a series of projections on growth and inflation. SOUNDBITE (English), MARIO DRAGHI, ECB PRESIDENT, SAYING: ''Inflation expectations are firmly anchored. So however, having said that, we'll certainly closely monitor any developments and let me say that we are fully aware of the downside risks that a protracted period of low inflation for an extended period of time, does imply." France confirmed a jobless rate at a sixteen-year high just before he spoke. Spain a drop in industrial output, appearing to dash hopes of a speedy exit from recession. Projections for growth next year were marked up a tiny amount - but it's likely to remain insipid. At the very least, investors can expect a dovish stance for quite a while. SOUNDBITE (English), MARIO DRAGHI, ECB PRESIDENT, SAYING: ''The message the Governing Council sends today is we are ready and able to act, within the formal guidance frame work. Forward guidance is there. We have not identified amongst the various, numerous instruments we have, one specific instrument in the discussion we had today.'' Even so Draghi did nothing to dispel expectations that - alongside a further rate cut - more money market operations to give banks cheap cash might be in the offing. A Reuters' poll suggests that may come early next year. But Thede Rüst of ING says it depends whether the ECB sees a fragmented two-tier recovery or deflation as the bigger worry. SOUNDBITE (English) THEDE RÜST, PORTFOLIO MANAGER, ING INVESTMENT MANAGEMENT, SAYING: ''For instance if you have the fragmentation where they would for instance go for the option, or it would be preferable to go for LTROs. But whereas if you talk about deflation, it could potentially be a cut of the deposit rate, but in order to have such a scenario we would have to be at the brink of deflation.'' And while Draghi repeatedly stressed that the ECB stands ready to act, his use of the phrase 'if necessary' suggests he hopes if might not be necessary. At least, not just yet.