All eyes will be on the European Central Bank this Thursday to see if any cuts are made to interest rates. ECB president Mario Draghi has said the bank stands ready to deploy unconventional measures such as a negative deposit rate if needed to fight the threat of deflation.
While euro zone inflation accelerated to 0.7 per cent last month from 0.5 per cent in March, according to the European Union statistics office, there is concern that consumer prices are rising too slowly.
The rate of inflation is still well below the European Central Bank's target of just under 2 per cent, adding to concern that the euro zone is unduly close to deflation. Despite calls from the International Monetary Fund and global peers, the bank has thus far refrained from taking measures to stimulate the bloc's economy and is widely expected to hold off again at its meeting this week.
The benchmark main refinancing rate has been at a record low 0.25 per cent since November and the deposit rate at zero since July 2012. The ECB left its monetary policy unchanged on April 3rd.
Most economists think the ECB will want to see inflation falling further before cutting interest rates, printing money or introducing other stimulus measures.
RBS senior strategist Paul Robson has said he does not believe the inflation reading is enough below the ECB's forecasts for it to jump into cutting the deposit rate this week, adding it will probably wait until updated forecasts next month.
