(MENAFN– ecpulse) While investors kept an eye on the Ukraine crisis, they also awaited the outcome of the next day`s European Central Bank (ECB) and the Bank of England’s monetary policy meeting later in the day. No change is expected but some analysts see chances of a rate cut in the ECB.
Markets were monitoring the situation after pro-Russian forces seized control of Crimea in the country. Although fears of a war between Russia and Ukraine have eased since the weekend.
Russian President Vladimir Putin said that military force would only be used as last resort.
Investors will be waiting today’s monetary decision amid expectations policymakers at the ECB will intervene after the recent drop in inflation below the bank’s target. Traders were also looking ahead to Friday`s U.S. jobs report for February.
BoE to stick on policy
The Bank of England (BoE) takes central stage as it releases it interest rate decision later in the session. Better than expected UK economic data helped to drive the pound higher against the U.S. dollar and euro and signaled a surprisingly rapid improvement in the UK economic growth.
A generally healthy economic outlook will give the Bank of England confidence to leave monetary policy unchanged on Thursday. Unlike the ECB, the BoE keeps their lips sealed until unemployment hits 7 percent threshold or inflation conditions deteriorate.
Gov. Mark Carney said interest rates won’t need to rise immediately, even as the unemployment rate falls closer and closer to the bank’s 7% threshold. Unsurprisingly, investors now expect the central bank to keep rates at a record low of 0.5% and make no changes to its £375 billion asset-purchase program.
Aside from low unemployment, the country has been staging a strong recovery, with solid economic growth and improving survey data. While all three Purchasing Managers’ Index (PMI) indices on services, construction and manufacturing remain well above 50.
Will ECB act against low inflation?
The European Central Bank (ECB) policymakers remain under pressure to either cut interest rates again or use additional unconventional measures to fend off the threat of ultra-low inflation turning into something worse like deflation.
The ECB is poised to take action to loosen lending conditions and drag inflation out of its current danger zone that threatens to weaken the economic fragile recovery. Draghi put investors on notice last month for potential stimulus in March and repeated last week that the ECB remains alert.
Better-than-expected inflation data for February expectations leading up to this meeting are extremely mixed, yet with annual inflation just 0.8 percent, well below the ECB`s target of just below 2% percent, some economists expect additional interest rate cuts soon.
Speaking to European lawmakers in Brussels on Monday, Draghi said Inflation expectations in the Eurozone remain firmly anchored in line with the ECB definition of prices stability, adding that the euro-area is clearly moving in the right direction.
Data-wise, revised Purchasing Managers’ Index (PMI) data on Wednesday showed Eurozone firms enjoyed their fastest growth rate in over 2-1/2 years last month while growth data, showed euro-area economic growth was confirmed at 0.3 percent expansion in the final three months of 2013.
The data moved in line with the recent ECB expectations the euro-area will experience a gradual recovery, providing encouragement to members of the ECC’s governing council as they prepare to meet at 12:30 GMT.
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