The European Central Bank is likely to keep interest rates on hold on Thursday while reminding the market that it will ease policy if inflation stays too low or money market conditions tighten too much.
ECB President Mario Draghi will reassure investors that the bank will not tolerate inflation holding persistently in the
"danger zone" below 1 percent.
ECB watchers will also be listening out for any hints about the central bank's preferred tools for keeping market interest rate rises at bay.
Annual euro zone inflation dipped to 0.8 percent in December from 0.9 percent in November, data showed this week, well below the ECB's target of just below 2 percent.
Economists nonetheless expect the bank to keep its powder dry this week after cutting its main rate to a record low of 0.25 percent in November.
"I don't think they see a need to act now," Deutsche Bank economist Mark Wall said, adding the ECB would keep its options open.
"It will be ... a watchful ECB, still dovish with its tone, forward guidance maintained, so a formal easing bias very much in place."
In a Reuters poll, all but one of 55 economists said they expected no change, and a large majority expect rates to stay at their current level until at least mid-2015.
With its main rate so low and its toolbox nearly depleted, the threshold for further easing has risen, even as the central bank worries about slow price rises.
"We must be very careful that we do not permanently fall below 1 percent inflation and thus into the danger zone," Draghi told German weekly Der Spiegel last week.
But he added: "We see no need for immediate action."
Economic recovery, while weak, has proceeded as the ECB has expected, giving it time to see if inflation picks up.
Still, Draghi could choose to emphasise his deflation-busting credentials this month.
Source: Reuters
ECB President Mario Draghi will reassure investors that the bank will not tolerate inflation holding persistently in the
"danger zone" below 1 percent.
ECB watchers will also be listening out for any hints about the central bank's preferred tools for keeping market interest rate rises at bay.
Annual euro zone inflation dipped to 0.8 percent in December from 0.9 percent in November, data showed this week, well below the ECB's target of just below 2 percent.
Economists nonetheless expect the bank to keep its powder dry this week after cutting its main rate to a record low of 0.25 percent in November.
"I don't think they see a need to act now," Deutsche Bank economist Mark Wall said, adding the ECB would keep its options open.
"It will be ... a watchful ECB, still dovish with its tone, forward guidance maintained, so a formal easing bias very much in place."
In a Reuters poll, all but one of 55 economists said they expected no change, and a large majority expect rates to stay at their current level until at least mid-2015.
With its main rate so low and its toolbox nearly depleted, the threshold for further easing has risen, even as the central bank worries about slow price rises.
"We must be very careful that we do not permanently fall below 1 percent inflation and thus into the danger zone," Draghi told German weekly Der Spiegel last week.
But he added: "We see no need for immediate action."
Economic recovery, while weak, has proceeded as the ECB has expected, giving it time to see if inflation picks up.
Still, Draghi could choose to emphasise his deflation-busting credentials this month.
Source: Reuters
