(MENAFN– ecpulse) This week the whole focus will be on the monetary decisions by the two giant central banks in Europe, the European Central bank and the Bank of England.
Perhaps, the spot light will be on the ECB decision, after the measures announced in June to stave off low inflation and bolster banks’ lending.
Last month, the ECB talked about details of the measures announced in June while mentioned that the ECB will publish minutes as of January 2015 and shift to six-week meetings cycle, which means three or four fewer meetings per year for the ECB.
The ECB decided in June to cut its benchmark interest rate to 0.15 percent from 0.25 percent and the deposit rate to -0.10 percent from 0.00 percent.
The bank also announced some measures including “further reductions in the key ECB interest rates, targeted longer-term refinancing operations, preparatory work related to outright purchases of asset-backed securities and a prolongation of fixed rate, full allotment tender procedures,” ECB bulletin for June said.
“The Governing Council decided to suspend the weekly fine-tuning operation sterilizing the liquidity injected under the Securities Markets Programme,” the bulletin added.
However, ECB Vice President Vitor Constancio said last week "we have to wait and see what will be the use of these measures. We won`t introduce new measures until we assess [whether] these measures will be as effective as we expected."
It seems that the ECB will be careful in using the previously mentioned measures, where it will all depend on the pace of economic progress in the economy.
Last month, the IMF cut its growth forecasts for the euro area to 1.1% from 1.2% forecast in April, while predicted inflation to average 0.7%, down 20 basis points from April.
"Weak aggregate demand is weighing on real activity and pulling down inflation across the euro area, as corporates, households and banks continue to repair their balance sheets," the IMF said in a statement. "Headline inflation is expected to remain below the ECB`s primary price objective for a protracted period, underscoring the risks from low inflation."
A report released last week signaled that euro area manufacturing growth stagnated in July.
As for inflation, concerns soared after the rate dipped further to a five-year low of 0.4 percent in the year ended July from a prior of 0.5 percent.
In the U.K., the situation looks different as Britain is set to have the strongest pace of growth amongst the G7 nations.
Britain returned to pre-crisis peak by posting its eight consecutive quarterly gain in the second quarter.
In the first quarter, the U.K. widened its expansion to 0.8 percent from 0.7 percent the previous three months it grew also 0.8 percent in the quarter through June.
The recent data from the U.K. has suggested the economy is moving on the right track towards recovery.
U.K. ILO unemployment for the three months through May resumed its drop to the lowest level in 5 ½ years.
CPI for the year ended June rose to 1.9%, from 1.5% in May, taking serious steps towards the BOE 2 percent target.
However, BOE Governor Mark Carney has mentioned the economy is still facing some challenges as he sees household debt high and expects exports to weaken due to the shaky situation in the euro area and the sterling’s appreciation.
The BOE is estimated to hold both interest rates and amount of asset purchases this month, where analysts predict the first interest rate hike to take place early next year.
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