FRANKFURT — The European Central Bank had been expected to announce a major policy shift on Thursday. The dollar has had other plans.
Since early 2015, the European Central Bank has been flooding the 19-nation eurozone with cash to lower interest rates, stimulate growth and raise inflation from levels considered to be dangerously low. The measures have worked for the most part, helping the region overcome a slump that lasted most of a decade.
But the program — known as quantitative easing — has also had some worrisome side effects, including fueling a steep rise in real estate prices in Germany that have led to fears of a bubble. The bank is now under pressure to reduce the stimulus.
That idea has been complicated, however, by a plunge in the value of the dollar. The American currency has declined more than 13 percent against the euro this year, driven largely by tensions with North Korea and dysfunction in Washington. So while analysts had predicted that a decision to “taper” stimulus would be announced at the meeting of the central bank’s Governing Council on Thursday, they now think that Mario Draghi, the central bank’s president, will wait until late October at the earliest.
From the central bank’s point of view, a strong euro and weak dollar are problematic for two reasons.
For one, when the euro rises against the dollar, European exports become more expensive — not only in the United States but also in other countries, like China, whose currencies are linked with the dollar. That typically means that European companies will sell fewer goods abroad, hurting growth and prolonging the need for central bank stimulus.
A robust euro also undercuts the bank’s efforts to jolt inflation back to the official target of 2 percent, a level considered healthy for growth. A strong euro holds down consumer prices by making imported oil and other goods cheaper for eurozone residents. That’s not all bad for people who live in Europe, but low inflation means that Mr. Draghi has to keep printing money longer than he would like.
The eurozone’s annual rate of inflation in August was 1.5 percent, and a substantial increase is nowhere in sight. According to forecasts by the central bank’s staff, which will be updated Thursday, inflation will still be below the target in 2019.
There’s not much Mr. Draghi can do about the weak dollar, which analysts say reflects pessimism about the ability of President Trump and Congress to agree on legislation that many economists believe would help goose growth in the United States, such as infrastructure programs or corporate tax reform.
“Investors no longer trust the American government to push through tax reform and fiscal stimulus,” Alwin Schenk, a portfolio manager at the German bank Sal. Oppenheim, said in a note to clients.
The dollar’s decline is also an expression of the nervousness investors feel about geopolitics, primarily nuclear saber-rattling by North Korea and bellicose rhetoric from Mr. Trump. The euro is seen as a safe haven from the turmoil.
In addition, investors have sold dollars and bought euros after becoming more optimistic about the eurozone’s prospects for growth.
The most the European Central Bank can do about the strong euro is, effectively, to talk it down. Mr. Draghi could express concern about currency rates when he holds a news conference Thursday, the kind of statement that would be seen by analysts and traders as an implied threat to pursue policies that would weaken the euro, for example by extending the stimulus measures.
But the bank is running out of time. It has been printing money for more than two years, using newly created euros to buy government and corporate bonds. It hopes to make it easier for governments to deal with their debts and cheaper for corporations to raise money that they can invest.
The bank has said it will spend 60 billion euros, or $71 billion, a month in eurozone bond markets at least through December, but has not said what it will do after that.
There is another reason the European Central Bank must dial back the stimulus — the supply of bonds may be getting scarce.
When it announced its quantitative easing program, the bank promised not to buy more than 33 percent of any one bond issue, to avoid distorting the market too much. The limit is also designed to protect against legal challenges by critics who say the bond buying is illegal because the central bank is barred by law from using its printing presses to finance eurozone governments.
Many analysts believe that it is becoming increasingly difficult for the bank to avoid exceeding the limit for German Bunds and other kinds of bonds because it has already bought so many.
Traders have repeatedly pushed back their bets of when the European Central Bank would begin tapering. Initially, some thought that Mr. Draghi would provide some guidance in August, when he spoke at an annual conference of economists and central bankers in Grand Teton National Park, Wyo.
Instead, he devoted most of a lunchtime speech to global trade, merely adding at the end of his remarks that monetary policy must remain “very patient” despite a strong economic recovery in Europe.
“A significant degree of monetary accommodation is still warranted,” Mr. Draghi said at the conference.
With the euro still on an upward trend, most economists believe that he will wait until a meeting of the European Central Bank governing council on Oct. 26 before he issues a tapering timetable.
To be sure, speculation about the central bank’s intentions is at such a fever pitch that Mr. Draghi will probably feel obligated to offer at least some general guidance. But he will keep the central bank’s options open.
“The E.C.B. will proceed very cautiously and retain a maximum of flexibility,” Michael Schubert, an economist at Commerzbank, said in a note to clients.