ECB to hold fire on rates despite slow inflation
The European Central Bank is not expected to cut its key interest rates this week, even though inflation in the euro area continues to slow, analysts said.
The ECB has held eurozone borrowing costs at their current all-time lows since November.
But no further monetary easing appears to be on the cards at the bank's next meeting on Thursday just yet, given recent data suggesting the region's economy is in a tentative recovery, central bank watchers said.
At the moment, deflation is perceived to be the biggest threat to that recovery. Last month, area-wide consumer prices edged up by just 0.8 percent, way below the ECB's target of just below 2.0 percent, with some observers warning of a destructive spiral of deflation. Deflation is a general decline in prices and can be highly damaging if consumers, expecting prices to fall further, hold off purchases.
March inflation data for the entire eurozone are not scheduled to be released until Monday.
But data on Friday showed that inflation in Germany, the region's biggest economy, slowed to just 1.0 percent this month, the lowest level in nearly four years.
ECB officials have repeatedly said they see no threat of deflation, but president Mario Draghi reiterated last week that the central bank stood ready to act if necessary.
"If any downside risks to (our inflation) scenario appear, we stand ready to take additional monetary policy measures that ensure our mandate is fulfilled," Draghi told a conference in Paris. "In other words, we will do what is needed to maintain price stability," Draghi insisted. Elsewhere, Slovak central bank chief and ECB governing council member Josef Makuch also said the bank was "ready to adopt non-standard measures to prevent slipping into a deflationary environment. The ECB has many measures on hand."