Even chance of ECB sovereign QE on weak economic, inflation outlook: Reuters poll

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By Rahul Karunakar

(Reuters) - Chances the European Central Bank takes the plunge and buys sovereign bonds are now 50-50, a Reuters poll showed, despite a rising threat of deflation and no prospect for any acceleration in economic growth any time soon.

To keep the euro zone from slipping into deflation, the ECB has been pumping money into the banking system by buying covered bonds and offering long-term loans, aiming to boost its balance sheet by about a further 1 trillion euros.

But there is growing doubt whether these measures, including purchases of asset-backed securities, will be enough.

Draghi said last week the Governing Council was unanimous in its decision to prepare for more unconventional easing measures if required and the bank's staff would lay the groundwork.

While a few economists saw that as a wait-and-watch approach, some saw it as a tiny step closer to the ECB buying sovereign bonds. The poll gave a 50 percent chance of that happening, up from 40 percent in a poll in September.

"Draghi sees the situation as a chronic threat to cohesion, so is pushing and prodding the ECB towards QE, which may be announced as soon as December," said Paul Mortimer-Lee, global head of market economics at BNP Paribas.

If the ECB does implement full-blown sovereign bond quantitative easing, it will do so in the first half of 2015 and spend 500 billion euros in total, according to a smaller sample of economists who answered a few extra questions.

That consensus for the cash the ECB will spend is only a fraction of the amount of money printed by the Fed and the BoE relative to the size of their economies.

And economists were not convinced it would help in bringing inflation back up.

"How the economy will respond to this is unclear. It is years too late, in our view, but confidence and inflation expectations could potentially rise when quantitative easing is announced," said Mortimer-Lee.

The latest poll showed, economists trimmed their growth and inflation outlook for the euro zone in line with the findings of a group of experts surveyed by the ECB.

The euro zone economy is predicted to expand by a feeble 0.2 percent this quarter and 0.3 percent in the first three months of 2015. The poll forecast growth of 1.1 percent for next year as a whole, down slightly from last month's survey.

Only one bank expected negative inflation numbers despite a few countries in the region already reporting falling prices on an annual basis. Predictions are for prices to rise by much less than the ECB's 2 percent target ceiling until 2016.

Inflation is expected to average 0.5 percent this year, 0.9 percent next year, and 1.4 percent in 2016.

A sovereign debt purchase plan by the ECB, half a decade after the Fed and the BoE embarked on such programmes, is staunchly opposed by Bundesbank head Jens Weidmann along with several other Governing Council members.

But a majority in a smaller sample of economists said it would be feasible for the ECB to proceed with sovereign debt QE even without unanimous consensus among its members.

"I do not expect that a full consensus will be possible, at best a silent acceptance by some will be what we get," said Daniel Bergvall, economist at SEB.

(For other stories from the poll see)

(Polling and analysis by Hari Kishan; Editing by Ross Finley)