The European Central Bank (ECB) is expected to introduce a number of policy measures later this week in an attempt to stop the Eurozone spiralling into a deflationary trap. President of the ECB, Mario Draghi, is expected to unveil a number of measures to stimulate growth and accelerate lending across the 18 nation bloc.
In particular, the ECB is expected to introduce negative interest rates, which means the ECB will charge banks to hold deposits with them overnight.
When the Bank of England (BOE) considered negative interests rate at the height of the financial crisis, Martin Weale, external member of the BOE interest committee warned that companies would respond by storing money in warehouses.
Although this would be an extraordinary move by the ECB experts don’t expect them to launch a full scale quantitative easing program when the committee meets on Thursday. Currently inflation in the Eurozone stands at 0.7%.