Two of the world’s biggest central banks are likely to find themselves with a bigger policy gap by the end of the coming fortnight.

The European Central Bank on Thursday will resist calls to start tightening policy against surging inflation but robust US jobs data yesterday could seal the case for another Federal Reserve hike the week after.

So, let’s say minus 0.4 per cent rates in Europe and more than 0.75 per cent in Washington.

With just weeks to go before contentious French and Dutch elections, the ECB will be keen not to rock the boat, so it is likely to give just a token nod to robust growth figures, steering clear of any policy hint that may give emerging populist movements ammunition.

A Reuters poll showed unanimity for no change. But the balancing act may be more difficult than it looks.

With growth on its best run since before the financial crisis and inflation peeking just above the ECB’s target, calls are mounting, particularly in Germany, for the bank to scale back its €2.3 trillion bond buying scheme and raise its negative interest rates.

Doves hold a comfortable majority among the policymakers, however, so any shift will come at the margins. In practice that could mean increased inflation forecasts, letting an ultra-cheap lending scheme to banks expire as scheduled, and dropping a reference to the risk that growth may disappoint.

Still, ECB president Mario Draghi will probably avoid any discussion about winding down asset buys, even pushing back on calls by some rate setters to tweak the ECB’s guidance, giving up its reference to further rate cuts, a possibility markets have already priced out.

“If the French presidential election also passes without turbulence, and growth and inflation data remain solid, the ECB might turn more hawkish in its meeting on June 8,” Reinhard Cluse, economist at investment bank UBS, said. “This would then leave the meeting on July 20 for preparing the markets for the tapering (off asset-buying) on September 7.”

For now though, Draghi will stick to his line that the inflation surge is temporary, growth is fragile and political risks clouds the outlook, requiring stimulus, a Reuters poll of analysts showed.

Having tightened policy in 2011 just months before the eurozone debt crisis started spiralling out of control, the ECB will be desperate not to move too early, even if it risks being called out by some for moving too late.

The Fed, meanwhile, must deal with what Draghi dubbed a high-class problem: solid growth, full employment and returning inflation.

Robust jobs growth threatens to overheat the labour market, just as inflation is heading higher, with the Fed’s preferred measure now in the upper end of the range central bank officials in December estimated would be reached this year. Manufacturing growth is also firming, offsetting relatively weak consumer demand, good enough for even the most dovish Fed officials to argue for a hike sooner rather than later.

Soothing global growth fears, meanwhile, China is expected to report another set of strong figures for both exports and imports, indicating that even if overall growth is slowing and debt is rising fast, the slowdown remains under control, mitigating the risk for emerging market economies. Indeed, China’s factory activity expanded faster than expected in February, firming arguments for the central bank to raise short-term interest rates by a another 10 basis points as soon as March.

Data due on Wednesday are expected to show Chinese exports up by 10 per cent in February while imports could have risen by 20 per cent, a boon for countries like Australia, which supply China with raw materials.

Indeed, the Reserve Bank of Australia may signal on Tuesday that policy easing is done, given the economy’s convincing rebound last quarter, rising commodity exports and a robust increase in household debt levels. (Reuters)