Growing disinflationary headwinds are likely to push the European Central Bank (ECB) toward launching a 300-500 billion euro asset purchase program on Thursday morning. Such a monumental shift in monetary policy posture from the ECB could deliver an outsized impact to global financial markets (although we have clearly seen some front running of this announcement in recent weeks).

An announcement at the upper end of the 300-500 billion euro range along with open ended language (alluding to the possibility that the ECB could increase asset purchases past the 1 trillion market if needed) from ECB President Draghi could send global stocks and precious metals skyward. A few key charts from BNP Paribas help to illustrate why a QE announcement from the ECB on Thursday is quite likely:

Click to enlarge

ECB_Balance_sheet_

While the Fed has spent the last year and a half aggressively expanding its balance sheet, the ECB has allowed its balance sheet to shrink.

EURO_M3

M3 money supply growth has consistently fallen short of ECB target levels and private sector bank lending remains anemic.

All of this adds up to a powerful set of disinflationary/deflationary forces throughout much of the eurozone. Only Germany appears to be immune from the eurozone disinflation plague, whereas, much of the eurozone periphery suffers with extraordinarily high rates of unemployment and stagnant economies.

Here's the money shot from BNP Paribas:

"Asset purchases are increasingly necessary in order for the ECB to meet its primary objective of maintaining price stability. Inflation in the euro area has persistently surprised to the downside, eroding the safety margin against deflation. „ Additional conventional policy easing will not deliver sufficient monetary accommodation for the price stability mandate to be met. Thus, the ECB will reluctantly have to follow other central banks into balance sheet expansion via asset purchases." (Reuters - ECB to take the QE plunge this year...finally)