The bank is expected to hold rates steady at its scheduled July meeting, the last before the long European break.
Market watchers have largely written off the chances of a cut this week and will instead be looking for clues about prospects for the rest of the year, with most expecting a reduction in September as long as there is no fresh shock to push inflation back up.
“I think they will say they are data dependent, meaning they can cut in September, but I don’t think they will indicate that is the way they will lean unless data supports it,” said Anders Svendsen, chief analyst at Nordea.
ECB policymakers have said they want to see wage and corporate profit indicators, due before the September meeting, before moving again.
The bank cut its main rate in May to 4.25pc from the peak of 4.5pc. As recently as this spring, many in the markets thought the ECB was on course to make four quarter-of-one-per cent cuts this year after hiking its key main refinancing rate from 0pc to 4.5pc over the course of last year and the year before.
However, the pace of the inflation slow-down has eased after sharp initial declines last winter. Inflation in the euro area did ease for the first time in three months last month, to 2.5pc, but in the services sector inflation crept up to 4.1pc.
The ECB will only cut rates when policymakers are convinced inflation is on course to fall to 2pc.
Expectations now suggest the main rate will drop to 4pc by the end of the year, or 3.75pc at most.
That is bad news for many borrowers, including those with tracker mortgages that automatically reset in line with the official rate, and others whose home loans were sold to non-banks and vulture funds after the financial crisis here. Many now pay by far the highest rates in the Irish market.
If the ECB does not bring new relief for borrowers this week, there is the prospect of a further boost in September, said Martina Hennessy, CEO of Irish mortgage broker Doddl.ie.
“If July does not bring another rate cut, the ECB has indicated that, following an Operational Framework review, they aim to align their refinancing and deposit rates in September,” she said.
“This technical adjustment of 0.35pc will benefit tracker mortgage holders, who will see a corresponding reduction in their rates.”
