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ECB set for growth-boosting interest rate cut
Expectations are running high that the European Central Bank (ECB) will loosen its monetary policy at its meeting on Thursday.
Most expect at least a cut to the benchmark interest rate, while others say the ECB will go further.
It is thought the ECB could introduce negative rates on deposits, in an effort to boost bank lending.
This would mean banks would pay to keep money at the central bank, rather than receiving interest.
Deflation threat
Recent economic indicators show that the recovery in the eurozone is subdued at best.
On Tuesday, figures showed that inflation fell to 0.5% in May, considerably below the ECB’s goal of just below 2%.
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This has raised the threat of deflation, in which growth essentially grinds to a halt because consumers put off spending in the belief that prices will fall further. Likewise, investors stop investing.