The European Central Bank (ECB) is expected to leave rates on hold for a second month today, after making a 50 basis points cut in December. Rates currently stand at 2.75pc, however, analysts say the easing of eurozone inflation in January to 2.1pc and from 2.3pc in December add to the case for a rate cut by the central bank. Declining retail sales amid rising unemployment and waning consumer confidence also point to the need for an easing of monetary policy.
"When we add this reducing inflation rate to the slowing money supply growth figures, the case is building for a rate cut; and as the sluggish retail sales data from eurozone show, the economy needs one," said Eugene Kiernan of Irish Life Investment Managers. But the ECB's traditional focus on price stability and inertia in the face of weak economic indicators is expected to result in rates being held, although if the eurozone economies continue on their current rocky road, a 25 basis points cut is expected in March or April. The Bank of England is also expected to leave rates on hold when it concludes its two day meeting at noon today. It has left rates on hold at 4.0pc for the past 14 months amid concern that a rate cut would result in overheating the housing market, where prices surged by 25pc last year. //www.fxcentre.com