Core Strategic Partners: As signs of a return to growth continue to elude the euro zone, markets are increasingly expecting the European Central Bank (ECB) to ramp up its monetary stimulus program when policymakers meet again this week.

The central bank’s President, Mario Draghi said at the last meeting that officials would reconsider the stimulus program early in March. Investors widely expect the ECB to venture further into negative interest rate territory in the hope such action will encourage commercial banks to lend to businesses and individuals.

In addition, many are hopeful that the current $60 billion monthly asset purchases the Bank makes as part of its quantitative easing program will be increased despite opposition to the policy by German policymakers.

“These monetary policy tools are great for investors in financial markets but there’s little doubt in the minds of most that they have little to no positive effect on the real economy” said Will Masson, chief markets strategist at Core Strategic Partners.

“There’s a growing sense right now that central banks have run out of tools to stave off another downturn. Negative interest rates are the latest tool they’ve deployed but there’s reason to believe that they could do more harm to European banks by squeezing their profit margins even further than they are already.”

Core Strategic Partners believes that any increase in the ECB’s QE program will give European equities a boost but Masson cautioned that upside could be limited by the recent strong rally across global equity markets.

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