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ECB to Cut Interest Rates

ECB head, Mario Draghi, is expected this coming Thursday to reduce the rate at which commercial banks borrow from by 0.10% (from0.25% to 0.15%) in order to encourage business lending.

The ECB is also expected to cut the interest rate it pays to banks.

Draghi is under pressure to launch bank lending after recent figures showed that Netherlands, Italy, Finland and Portugal saw their economies contract in the first three months of the year while France remained stagnated.

Low inflation across Eurozone countries has also discouraged shoppers from spending, another factor that has been taken under consideration by the ECB.

In April inflation rose to 0.7 from 0.5% in March, but remained in what the ECB calls the "danger zone" of below 1%, and well below the ECB's target of close to 2%.

The ECB, will announce its decision on Thursday, however at the last policy meeting in May, mr. Draghi had said the ECB was “comfortable with acting in June if updated staff forecasts showed the situation remained the same or worse”.

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