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The Governing Council of the European Central Bank is unlikely to take any new decisions on Thursday when the bank's policymakers review monetary policy for a second month this year.
The rate-setting body, led by President Jean-Claude Trichet is widely expected to hold the key interest rate at a record low of 1% for a ninth consecutive month. The last change in the key interest rate was in May 2009, when the bank cut the rate by 25 basis points to the current level of 1%. The bank had lowered the key interest rate by a total of three and a quarter percentage points since early October 2008.
Interest rates on marginal lending facility and deposit facility are expected to be held at their current levels of 1.75% and 0.25%, respectively.
"I don't see any tendency or any need for a change in interest rates for the time being, given the economic forecasts both from the ECB and other institutions, and especially given that we do not see major risks for price stability," ECB Governing Council member Ewald Nowotny said on January 26.
The Frankfurt-based central bank is set to announce the decision at 7.45 am ET. Thereafter, Trichet and ECB Vice President Lucas Papademos would hold a regular press conference. The central bank chief is expected to reiterate that "current rates remain appropriate".
Economists at Bank of America Merril Lynch expect the ECB to raise rates only in September. The firm does not expect Trichet to depart from his January stance that the next exit steps could be announced in March.
According to Carsten Brzeski, Senior Economist at ING, the main message of Thursday's meeting will make the "rendezvous" in March should be more exciting. In the absence of any news on monetary policy, this week's ECB meeting will probably again be dominated by Greece, he said in a note on February 1.
In the press conference held last month, Trichet had made it clear that the ECB will not change its collateral framework for any single Eurozone country. The central bank chief is expected to repeat his statement this time.
The ECB is also set to unveil its latest staff forecasts. Economists expect these forecasts to remain unchanged from the previous predictions. In their previous forecast in December, ECB staff presented a more positive economic outlook. They forecast that the Eurozone economy would grow between 0.1% and 1.5% in 2010 and between 0.2% and 2.2% in 2011.
Trichet had said on January 21 that he expects the Eurozone economy to stage a moderate recovery in 2010. "I should add, though, that the recovery process is likely to be uneven, and the outlook remains subject to high uncertainty," he said.
On prices, the December 2009 Eurosystem staff projections foresaw annual HICP inflation of between 0.9% and 1.7% in 2010 and between 0.8% and 2% in 2011. The central bank targets to keep inflation below, but close to 2% over the medium term. According to a flash estimate from the Eurostat, inflation rose to 1% in January from 0.9% logged in December.
Among other leading economic indicators, the seasonally adjusted jobless rate for the region inched up to 10% in December from 9.9% recorded in November. The region's manufacturing sector continued to expand for the fourth consecutive month in January, led by France and Germany. On the back of improving economic conditions, economic sentiment improved for a tenth straight month in January.
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