ECB President Mario Draghi has said that the bank is prepared to act and has several tools at its disposal if need be. Now investors are trying to work out just what those tools are.
Most analysts think the bank will cut its key interest rate as well as take the deposit rate below zero. If the bank does decide to enact a negative deposit rate, it will be the first major central bank to effectively charge the banks for holding onto excess cash.
Related: Euro Below $1.36 On Poor Unemployment Figures
Some also believe that the ECB could use some type of quantitative easing program in order to stimulate the economy and inject funds into the struggling financial system. Regardless of precise approach, the bank is seen easing further in order to combat the region’s falling inflation figures and keep the common currency from rising.
The euro did receive some support on Thursday as the dollar fell under pressure due to lackluster GDP data from the US. The Wall Street Journal reported that US GDP contracted by one percent in the first quarter, below the Commerce Department’s estimate for 0.1 percent growth.
The drop was disappointing to markets as it was the nation’s first quarter of contraction in three years. However, most expect to see marked improvement in the second quarter, believing severe winter weather explains the data. That weather caused poor results for several US economic indicators at the beginning of the year.
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