THE European Central Bank is set to cut its key interest rate to 1% this week, the lowest in its 10-year history.
The ECB is also expected to embrace other measures to boost the money supply and head off the threat of deflation.
Analysts will also be closely watching Thursday’s announcement from the Bank of England. Its monetary policy committee (MPC) will keep Bank rate on hold at the current record low of 0.5%, but markets will be scrutinising what it says about quantitative easing – deliberately boosting the money supply by purchasing bonds.
The Bank has permission from the Treasury for a total of £150 billion of quantitative easing, which it began in March, and has committed to complete the first £75 billion by the end of this month.
There is uncertainty, however, about whether it will go further, and a lack of clarity could undermine the gilt market, which has benefited from the Bank’s purchases.
One possibility is that the MPC will signal its intentions on a monthly basis, going further than the initial £75 billion but not as far as the full £150 billion.
A survey of analysts by ideaglobal.com, a financial-research company, shows a split on whether the Bank will push ahead with the full £150 billion, 52% expecting it do so and 48% saying it will stop short.
There is a similar split around ECB intentions. The survey puts a 55% probability on it introducing quantitative easing. However, it may adopt other “non-standard” measures to boost lending.
Quarterly sales of privately owned UK mid-market companies fell for the fifth time in succession in the first quarter, but the drop was marginal.
Company prices, however, fell 12%, according to BDO Stoy Hayward’s latest private company price index.
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