The European Central Bank governing council meets on Thursday, but traders have lowered their expectations of further easing.
The Bank of England left interest rates unchanged last week, after the majority of the bank’s monetary policy committee voted to keep rates on hold at 0.5 per cent, easing pressure on the ECB to act immediately.
Bank of England governor Mark Carney said he was not a fan of the ECB's negative interest rates.
The Bank of England rates decision surprised investors, who had priced in more than an 80 per cent chance the rate would be lowered.
Money markets now price around a 20 per cent chance that the ECB cuts rates by 10 basis points to minus 0.50 per cent next week, having seen around a 30 per cent chance before the Bank of England decision.
An analyst at BMO Global Asset Management said the ECB will not act directly just because the Bank of England has done something, adding that any change in growth outlook in Britain is very likely to also impact growth in Europe. However, he said he wouldn’t be surprised if the ECB continues to loosen monetary policy.
Earlier this year, the ECB cut its main interest rate to 0 per cent, taking the financial markets by surprise. It also cut the interest rate on deposits held by banks at the central bank to minus 0.4 per cent from minus 0.3 per cent.
