Mario Draghi, President of the European Central Bank.
The European Central Bank (ECB) and outgoing President Mario Draghi are caught in a "Catch 22": The market expects so much stimulus on Thursday that it seems almost impossible to surprise the upside.
The economy is showing further signs of weakness, inflation is not picking up and the US-China trade war has no real end in sight. So what will the ECB do?
"We still believe that Mr Draghi will have a sufficient majority in the Governing Council to push through a package that will include interest rate cuts and restart of the asset purchase program," Dirk Schumacher, an ECB Caller with Natixis, said in a note to clients .
The meeting comes as some ECB hawks in recent weeks have been trying to downplay the chances of a huge stimulus package.
"Judging from (the) most recent comments by the board, there is no clear consensus in the board on the size and scope of potential relief."
Recent financial data does not indicate anything particularly positive, although the leading indicators has something stabilized. The purchasing managers' indices for Europe show a stabilization, although the weakness persists in the industrial space. The question is whether and when the discharge will happen to the service sector and the labor market ̵
So given the huge expectation the ECB is tackling, is there room for an upside surprise?
"Potential surprises may include an extension of the QE (quantitative easing) eligible universe to new asset classes (senior bank debt or equities), or more radical changes in QE parameters (distant capital keys)," said Frederik Ducrozet, who looks at the ECB at the Pictet in Geneva.
"The line for such radical changes seems high, although we will not rule out anything in a more damaging scenario next year."
The ECB is expected to do the following in detail:
- Cut down the deposit rate.
- Restart monthly net asset purchases.
- Strengthen its future direction by expanding the horizon to keep interest rates at current or lower levels beyond the first half of 2020.  Introduce a bank deposit tiering system.
- Raise the self-imposed issuer limit for government bond purchases from 33% to 40%, or even 50%.
If that's what we get, it will probably be the most comprehensive package ever by the ECB and a sign that the central bank has changed under the new chief economist Philip Lane.
Although critics are getting louder and louder and questioning the effectiveness of further relief, Draghi has become increasingly vocal about weaker-than-expected inflation in recent weeks.
"As you know, inflation expectations have now been at a historically low time. So we have to consider that. With the concession – and again, it is very important – with the concession that we do not like this," he said during the last July press conference. .
It is likely that he is not much happier now.