ECB ready to act to fight deflation

FRANKFURT, June 1 (AFP): Financial markets are betting on an interest rate cut from the European Central Bank (ECB) next week as low inflation, the strong euro and anaemic credit finally spur it into action.

The ECB has held its key interest rates steady at their current all-time lows since November, repeatedly promising to act if necessary to avert deflation in the 18 countries that share the euro.

Inflation is still way below the ECB's target of 2.0 per cent and shows little sign of picking up any time soon.

Hence, ECB president Mario Draghi more or less pre-announced a move at the bank's last policy meeting, saying the central bank's decision-making governing council was "dissatisfied" with the current path of inflation and was "not prepared to accept it as a fact of nature."

But the precise method and extent of any monetary easing would depend on the ECB's updated inflation forecasts, scheduled for next week, Draghi said.