By Jonathan Cable
LONDON (Reuters) - Growing worries that plunging oil prices may send the euro zone into a deflationary spiral will push the European Central Bank to buy sovereign debt early next year, a Reuters poll showed.
Economists were near unanimous: 25 of 27 said the ECB would begin buying sovereign bonds within a few months, some half a decade after the Bank of England and Federal Reserve embraced quantitative easing (QE).
March is looking most likely for an announcement. But the majority respondents did not respond when asked which countries' bonds would make the most effective buys in policy terms, and those who did had wildly conflicting views.
The median probability of the ECB conducting full QE, which has been stuck at 50 percent for the last few polls, shot up in this week's poll to 70 percent.
It may go higher if there is a disappointing take up at the bank's offer of more cheap cash on Thursday: expectations have steadily sunk in recent weeks.
"ECB President Mario Draghi could hardly have sent clearer signals at the December press conference that the central bank will launch a programme of quantitative easing," said Jennifer McKeown, senior European economist at Capital Economics.
Inflation was just 0.3 percent in the 18-member currency union last month and the next reading, for December, is likely to fall again, possibly to zero.
With oil prices tanking, there is a serious risk the bloc slips into deflation, although only six economists in the poll had negative inflation figures in their forecasts.
Still, 22 of 24 economists said plunging oil prices leading to falling inflation -- not the possible boost to consumer spending from cheaper fuel -- was the most significant development for monetary policy.
Inflation is expected to fall further from November's five-year low early next year before rising but will only escape the ECB's "danger zone" of below one percent near the end of 2015.
As part of its battle to drive up inflation and spur growth the ECB has already slashed interest rates, flooded markets with cheap cash and pledged to increase its balance sheet by around one 1 trillion euros (790.4 billion pounds).
Germany, the euro zone's dominant economy, remains firmly opposed to full QE and the poll found most economists thought the ECB would also buy corporate bonds -- although there is only a limited supply of them.
Given that the amount banks are expected to borrow in the ECB's second tranche of targeted long-term refinancing operations (TLRTO) on Thursday has plunged in the past two months to 130 billion euros from 175 billion, meeting the balance sheet target without QE could prove impossible.
Combined with the 82.6 billion euros that banks took at the first tender in September, the estimate suggests banks will only borrow just over half the total amount on offer.
"The current measures will not be enough to boost the balance sheet. Without a broadening of the ECB purchases we expect the balance sheet to be broadly at the same level in mid-March 2015 as it was in September 2014," said Pernille Bomholdt Nielsen, senior analyst at Danske Bank.
Despite the cheap cash and predictions that interest rates won't move from record lows until 2016 at least, gross domestic product (GDP) will expand only 0.8 percent this year, 1.0 percent next and 1.5 percent in 2016, the poll of 56 economists found.
That compares to 2015 and 2016 growth forecasts of 2.6 and 2.4 percent in Britain and 3.0 and 2.8 percent in the United States, the world's largest economy.
(Polling and analysis by Sarmista Sen and Kailash Bathija)