Five Questions for the European Central Bank's Policy Meeting

The European Central Bank pulled off a delicate balancing act seven weeks ago, announcing a major reduction of its bond-buying program that didn't upset financial markets.

But several top ECB officials were unhappy with that decision. They have been calling publicly for a swift end to the bank's bond purchases, known as quantitative easing, or QE, pointing to accelerating economic growth across the 19-nation eurozone and side effects from years of easy money.

There's no obvious need for the ECB to act again at its policy meeting Thursday. Its policy course is already set through next summer: The bank will continue buying bonds through September 2018, at a reduced pace of EUR30 billion ($35.3 billion) a month.

Still, investors will listen closely to ECB President Mario Draghi's press conference at 8:30 a.m. EST for clues on how quickly the bank might subsequently phase out QE and follow the U.S. Federal Reserve on the path toward higher interest rates. Here are five questions ahead of the ECB's policy decision, due at 7:45 a.m. EST.

What is the ECB expected to do?

Nothing, yet. But some analysts expect a subtle shift in tone from Mr. Draghi, to acknowledge the strength of the eurozone's economic recovery, and perhaps to signal that QE won't go on forever. That would be a nod to the ECB officials, including the heads of the Dutch and German central banks, who are unhappy with the decision not to announce an end date for QE.

How strong is the eurozone economy?

It's humming. The euro area has notched 18 straight quarters of growth, and business and consumer sentiment are at postcrisis highs. New ECB staff economic forecasts, to be published Thursday, are expected to underline the rosy outlook, showing growth of around 2% at least through 2019. The forecasts for 2020 will be unveiled for the first time.

So is the ECB doing too much?

While growth is accelerating, inflation remains too weak. It is expected to hover around 1.5% through 2019, some way from the ECB's goal of just below 2%. Meanwhile, economic uncertainties remain. Germany is still without a new government, and Italy's populist 5 Star Movement could emerge from national elections early next year as the strongest political force.

What is the ECB likely to do next?

Sometime over the coming months, analysts expect the ECB to tweak its guidance to investors to indicate that QE could be wound down soon. The bank has promised to extend the program until inflation is close to its target -- that pledge will likely be dropped in the months ahead. Mr. Draghi also might explain what will happen to QE after September: He said in October the program wouldn't end abruptly, but the minutes of the bank's last policy meeting suggest the topic wasn't actually discussed by ECB officials.

Will the ECB be able to find enough bonds to buy next year?

The latest extension of QE means the ECB soon might struggle to find enough bonds to buy. Mr. Draghi might explain how the ECB could avoid any bottlenecks, perhaps by tilting purchases toward corporate bonds at the expense of sovereigns. That would invite questions about the riskiness of such a move: The ECB stands to lose money -- on paper at least -- on its bonds in retailer Steinhoff International Holdings NV, bought under QE, after they were downgraded this month to junk following possible accounting irregularities at the company.

Write to Tom Fairless at tom.fairless@wsj.com

(END) Dow Jones Newswires

December 14, 2017 00:14 ET (05:14 GMT)