I have updated my ECB-ometer ahead of next week's policy meeting. The model suggests an "average interest rate recommendation" among the 21 Governing Council members of -10 bp, insufficient to trigger a forecast of a rate cut (threshold -12.5 bp) but consistent with a clear easing bias. This is the most dovish reading for 30 months - see chart. (More explanation of the model can be found here.)

The further shift over the last month reflects a combination of slower fourth-quarter GDP growth, a rise in the euro and a decline in short-term government bond yields, partly reflecting further credit market deterioration. With business and consumer confidence stable but lacklustre, these changes would have triggered a forecast rate cut but for continuing high inflation and money supply readings.

The model is now diverging significantly from the neutral policy stance articulated by ECB President Trichet at the last press conference, not to mention recent more hawkish comments from Bundesbank President Weber. The Bundesbank intervention is probably aimed at heading off a shift to more dovish language in next week's statement. It may succeed this month but pressure continues to build for a rate cut in the second quarter, with May currently looking the most likely month.