AFP, Frankfurt :
The European Central Bank is unlikely to make new policy moves at its monthly meeting on Thursday, focusing instead on assessing the impact of last month’s unprecedented package of measures. After cutting rates last month and unveiling new liquidity measures in its battle to prevent the single currency area from slipping into deflation, the ECB will “sit tight” at its meeting on Thursday, central bank watchers predicted.
Eurozone inflation is still stuck at the lowest levels since the financial crisis, data from the European Union’s Eurostat data agency showed on Monday.
Authorities across the eurozone are closely watching the inflation rate in the hope that it will edge up towards the bank’s target of just under 2.0 percent.
Inflation across the 18-nation eurozone was 0.5 percent in June-the same level as in May. This means that inflation is at the lowest level since the financial crisis of 2008-2009 nearly froze the market on which banks lend to each other and caused recession in several advanced economies.
Since unduly low inflation raises a risk of deflation which is notoriously difficult for central banks to reverse, the ECB has stepped in.
“More concrete easing steps at this week’s meeting would be very surprising, but the ECB will maintain its dovish language and potentially announce important details of its June decisions,” said Berenberg Bank analyst Christian Schulz.
At its June meeting, the ECB entered uncharted waters, taking one of its key interest rates into negative territory for the first time.
