europska banka, European Central Bank.jpg
Photograph: Photo by Volker Kannacher, used under CC BY-ND

The European Central Bank is expected to announce on Thursday that it has cut interest rates again and expanded its bond-buying programme as it attempts to fire up the eurozone's sluggish economy and head off dangerously low inflation.

Analysts expect the package of new stimulus measures to be unveiled by ECB chief Mario Draghi will include driving the Frankfurt-based deposit rate deeper into negative territory with a minimum of a 10-basis-point reduction.

Currently standing at minus 0.3 per cent, the deposit rate is what the ECB charges financial houses for parking funds at the bank.

However, the ECB is expected to decide that its benchmark refinancing rate will remain on hold at a historic low of 0.05 per cent. The refinancing rate has been unchanged since September.

Markets see the ECB's new round of action as almost certain after consumer prices in the 19-member eurozone tumbled back into negative territory last month when they fell by 0.2 per cent year-on-year, the European Commission's statistics office Eurostat said last week.

The February drop pushed prices further away from the ECB's annual inflation target of just below 2 per cent.

Many analysts expect Draghi to also say on Thursday that the bank has lowered both its inflation and economic projections.

With this in mind, the ECB chief is also widely tipped to announce that the ECB has agreed to ramp up its bond purchases by 10 billion euros (11 billion dollars) a month under its quantitative easing (QE) programme as well as extending the QE scheme to beyond its present cutoff date of March 2017.

The ECB currently buys 60 billion euros a month of mostly government bonds under its QE programme, which was formally launched 12 months ago.

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