Global Economy Weekahead: ECB to be all talk and no action

By Jonathan Cable

LONDON (Reuters) - Mario Draghi's latest recipe for tackling the economic crisis is likely to dominate the debate in the coming week, when he outlines the ECB's thinking following Thursday's meeting, at which no further policy changes are expected.

Last month the European Central Bank unleashed a volley of interest rate cuts, additional monthly bond purchases and more cheap loans to banks.

This time -- particularly following vocal complaints from German politicians about ultra-low rates creating a "gaping hole" in savers' finances and pensioners' retirement plans -- focus will be on President Draghi's words at the news conference.

"Draghi will respond to German politicians' recent criticism of the ECB's ultra-loose policy at the meeting on 21st April by reiterating the Bank's independence and stressing that more support is still possible," said Jennifer McKeown at Capital Economics.

"In the meantime, President Draghi will keep pressing governments for growth-boosting reforms."

Other central banks in Japan, Sweden and Switzerland have also adopted negative interest rates, but with global growth and inflation losing momentum -- despite years of ultra-loose policy -- now might be the time for a shift of emphasis towards fiscal expansion.

Some 86 percent of economists polled around the globe by Reuters in the past week said yes when asked if major developed economies should now use fiscal policy to add stimulus, as Canada has done, rather than even more aggressive monetary easing. [ECILT/WRAP]

German Chancellor Angela Merkel also weighed into the debate on Wednesday, pressing Europe's governments to do more to generate growth that she said would help push up inflation.

Low oil prices have meant most central banks have so far struggled to get inflation to rise to anywhere near where they want it to be and while oil analysts have raised their average price forecasts for 2016, they cautioned investor sentiment may sour in the short term.

The world's biggest oil producers from both within and outside the Organization of the Petroleum Exporting Countries (OPEC), including Saudi Arabia and Russia, meet in Doha on Sunday to discuss a proposed output freeze at January's levels.

But by freezing production near current levels - which would see some 2 million barrels of crude produced every day in excess of demand - it is unlikely any deal would reduce the glut that has pulled down crude prices by as much as 70 percent since 2014.

"Few details have been released in advance, and the differing positions taken by several key countries have made a clear consensus elusive," said Mike Moran at Standard Chartered.

"The main intent of the meeting is to signal a first, if small, step towards producer dialogue and supply-side management."

LIGHT DATA WEEK

In a very quiet week for economic data, Markit publishes its flash Purchasing Managers' Index for the euro zone on Friday, one of the first indicators to give a clue as to how the bloc's economy has fared in a month.

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It is expected to show growth remained muted in April but attention will be on the output price index for clues as to whether there have been any inflationary pressures.

"We assume that the PMIs for April will signal no spring awakening in the euro zone economy," said Christoph Weil at Commerzbank. "In particular, inflation and inflation expectations continue to look sluggish."

British retail sales will provide further information on the health of the UK's economy in the opening quarter of 2016, likely pointing to consumers remaining nervous.

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However, unemployment probably held steady at a 10-year low of 5.1 percent in February and wage growth likely accelerated, offering some good news to the government who are hoping Britons vote to remain a member of the European Union in a referendum.

A June 23 vote could see the country tear up its EU membership card - a move that would hurt the economy according to an overwhelming majority of economists polled by Reuters.

Chancellor George Osborne will speak on the risks of a Brexit, as a vote to leave is known, on Tuesday.

Britain could deal a damaging blow to the global economy if it votes to leave the EU, the International Monetary Fund said on Tuesday, in the sharpest warning yet from a global body about the risks associated with Brexit.

With little excitement other than some housing statistics expected in the United States, markets will instead listen to Fed Presidents William Dudley, Neel Kashkari, and Eric Rosengren speaking ahead of the next policy announcement on April 27.

The U.S. Fed will probably raise interest rates twice this year, most likely next in June, but the probability has faded on signs of a weak start to the year, inflation that is still tame and a brittle global backdrop, a Reuters poll showed.

(editing by John Stonestreet)