Euro bank tipped to cut interest rates

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Rock-bottom eurozone interest rates could be slashed again next week amid fears that the continent is falling into a damaging spiral of deflation.

The European Central Bank (ECB) is being tipped to take radical action on Thursday which could even see rates go into negative territory.

It comes on the same day as the Bank of England’s Monetary Policy Committee is expected to again hold the UK rate at 0.5 per cent – despite growing signs of dissent about when it will have to rise.

The week’s economic drama is likely to play out in Frankfurt rather than Threadneedle Street with ECB president Mario Draghi expected to set out new stimulus measures.

Mr Draghi has indicated in recent days that the bank needs to be on its guard against a crippling “negative spiral” of falling prices that could drag down the economy.

The ECB meeting takes place against the background of a slow recovery in the 18 countries that share the euro currency.

Economists think the bank is likely to cut its benchmark interest rate from 0.25 per cent to stimulate lenders that deposit with it to provide finance to businesses and consumers.

The ECB could even impose a negative rate, effectively a charge for holding the money – pushing them to loan money out instead of hoarding it.

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