RTTNews - Thursday, the European Central Bank is due to announce its monetary policy decision at 7.45am ET.

Most economists do not expect the ECB to make any change in its key interest rate from its current level of 1%. The central bank, which changes its Governing Council meeting venue twice a year from its headquarters in Frankfurt, is holding July's meeting in Luxembourg.

In June, the ECB left its key interest rate, which is the refinancing rate, at a record low of 1% after cutting it by a quarter-point in May. The ECB has lowered interest rates by a total of three and a quarter percentage points since early October 2008.

On June 24, the ECB had injected EUR 442 billion to banks for 12 months, the biggest amount it has ever given in a single auction. The decision was the latest in ECB's efforts to maintain proper functioning of the financial market amid the global economic crisis. The previous record-high allotment was in December 2007, when the bank pumped in EUR 348.6 billion.

The new liquidity injection by the ECB came on the heels of calls for mopping up excess liquidity when the appropriate time comes. A day before the ECB pumped new money into the banking system, ECB Executive Board member Christian Noyer had said the bank must be ready to absorb excess liquidity as soon as necessary. Another ECB rate-setter, Germany's Axel Weber had said there is no need of additional stimulus now.

The ECB would start buying EUR 60 billion of covered bonds this month to boost lending. The plan was announced in May and partially detailed in June. ECB President Jean-Claude Trichet, who said in June that the economy is still in uncharted waters, is expected to reveal further details of the plan in his regular post-decision press conference at 8.30am ET.

Strengthening hope that the worst of the recession would be over soon, economic sentiment rose for the third straight month in June. Significant improvements seen in the purchasing mangers' indicators also suggested the same.

Inflation in the 16-nation economy turned negative in June for the first time on record, raising deflationary fears. In June's, Trichet had said Eurozone's annual inflation rates are projected to decline further and temporarily remain negative over the coming months, before returning to positive territory by the end of 2009. He is expected to reiterate the assessment in today's statement.

Earlier in the day, Sweden's Riksbank lowered its key interest rate by 0.25 percentage point to 0.25% and said the rate is expected to remain at this low level over the coming year. In addition, the Executive Board of the Riksbank decided to offer loans totaling SEK 100 billion to commercial banks at a fixed interest rate and with a maturity of 12 months to ensure that monetary policy has the intended effect.

Elsewhere, the Central Bank of Iceland held its policy interest rate unchanged at 12% after lowering the rate by 100 basis points in June.

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