Thursday, the Governing Council of the European Central Bank is set to announce its monetary policy decision at 7.45am ET.

The ECB is expected to cut its key interest rate, which is the rate on main refinancing operations, by 50 basis points to a new low of 1% as the 16-nation bloc is sliding deeper into recession.

In March, the central bank had resumed the process of reducing interest rates after pausing in February. The central bank had lowered the rate to 1.5% from 2%. The March level was the lowest in the institution's 10-year history.

In addition to the decision on interest rates, economists also expect the ECB to introduce non-standard measures to ease credit strains as traditional measures approach their limit.

Non-conventional monetary policy measures are being increasingly embraced in the developed world. In March, the Bank of England had announced a GBP 75 billion-asset purchase scheme to kick-start the UK economy that is slipping deeper into recession, while the interest rates are at record low.

Across the Atlantic, the U.S. Federal Reserve also has adopted quantitative easing measures. In Asia, the Bank of Japan, known for taking to quantitative easing a few years ago, is also buying corporate bonds.

ECB President Jean-Claude Trichet, who is scheduled to hold his regular post-meeting press conference at 8.30am ET, had said in an interview with the Wall Street Journal that the central bank may continue to be non-conventional in boosting bank lending,

Commerzbank analyst Christoph Weil expects the ECB to cut its key interest rate by 50 basis points to 1% and consider additional unconventional measures this week

Recent data has shown below-target inflation and rising unemployment in the 16-nation euro area. Annual inflation in March eased to its lowest level since the launch of the euro ten years ago. It now stands at 0.6%. The central bank targets inflation rate of below, but close to 2% over the medium term. The Euro area unemployment rate increased to a near three-year high in February, while economic sentiment hit a fresh low in March.

The Organization for Economic Co-operation and Development forecast the euro area GDP to drop 4.1% in 2009 and by 0.3% next year. Weak export markets, falling investment and a continuing credit crunch will hit Euro area activity hard over the coming six months, it said.

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