All 78 economists polled by Reuters see rates being cut to the lowest level in the ECB's ten-year history in March, following a pause at 2.0% in February.
A cut has been on the cards since January when ECB President Jean-Claude Trichet described the meeting as an important rendezvous for the bank's rate setters (EurActiv 16/01/09).
The Bank of England is also tipped to follow on the ECB's footseps by cutting its own rate to 0.5%, down from 1.5% (EurActiv 14/01/09).
The action is unlikely to stop there. Economists expect the ECB to renew its vows to support money markets through sickness and back into health. There is also hope Trichet will use a news conference today (5 March) to hint the ECB is closer to deciding on other ways to boost the struggling euro zone once it runs out of ammunition with interest rates.
"We expect the ECB to cut rates by 50 basis points like most people, but what will really be interesting is what Trichet says about potential non-conventional measures," said UBS economist Stephane Deo.
"The question is what else they can do? They could buy paper on the market, they could intervene more on the money markets and there is talk about clearing houses for certain assets," he added.
Germany's Axel Weber and France's Christian Noyer said this week that the bank is weighing up all options to expand its monetary toolbox, including buying short-term commercial debt.
Other ECB policymakers, including George Provopoulos, Ewald Nowotny and Miguel Angel Fernandez Ordonez, have made similar comments. However, some analysts think Trichet will hold fire on the subject for now.
ECB economic forecasts
The ECB is also expected today to release its latest quarterly in-house economic forecasts.
Following a dire spate of economic data in recent weeks, which included confirmation of the worst quarter for euro zone gross domestic product (GDP) on record, economists expect heavy downward revisions compared with the last set in December.
Staff then forecast GDP ranging from no change to a 1.0% fall this year, and growth of between 0.5 and 1.5% next year.
But ECB Executive Board member Juergen Stark has said he expects the new forecasts, to be released during a post-decision news conference, to be in line with the latest IMF forecasts, which see a two percent contraction this year.
Inflation projections are also expected to be cut. Last time, staff saw inflation of 1.1 to 1.7 percent in 2009 and 1.5 to 2.1 percent in 2010. Analysts now expect it to average well under one percent this year and stay below the ECB's comfort zone of close to but below two percent in 2010.
They say that could be all the evidence policymakers need to continue cutting interest rates as well as looking for other ways to boost the economy over the coming months.
(EurActiv with Reuters).
