RTTNews - Thursday, the European Central Bank in its Monthly Bulletin said the Eurozone annual HICP inflation rate is expected to stay below 2% in 2010, reflecting ongoing sluggish demand in the euro area and elsewhere.

The Governing Council expects to see headline annual inflation rates declining further in the months ahead and temporarily reaching negative levels around mid-year. Later on, annual inflation rates would increase. However, such short term movements are not relevant from a monetary policy perspective.

Last week, the ECB had cut its benchmark interest rate to a new low of 1%. At the press conference accompanying the decision, ECB President Jean-Claude Trichet said the central bank plans to buy euro-denominated covered bonds.

On May 13, ECB's Governing Council member, Axel Weber said it should reduce or even invert the stimulus as soon as the situation improves. Weber expects positive inflation in the long term rather than deflation.

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