European Central Bank expected to axe rates to boost ailing economy

Special Report:Global Financial Crisis

BRUSSELS, Dec. 4 (Chinese media) -- The European Central Bank (ECB) is expected to slash interest rates here on Thursday to help reactivate slumping European economy.

Economists expected the ECB's 21-head monetary policy council, at its regular out-of-town meeting in Brussels, to announce at least 0.5-percent reduction of the rates as the economic picture is getting dimmer and inflation pressure disappearing with the fall of oil and food prices.

Some economists even expected a reduction of 0.75 percent or 1.0 percent.

The current rate stands at 3.25 percent after the Bank had two cuts totaling one percentage point since October.

Official figures showed that the eurozone economy entered recession in the third quarter and economic sentiment in the eurozone dipped to a 15-year low last month.

Also on Thursday, ECB chief Jean-Claude Trichet is to release the bank's latest predictions of new inflation and economic growth.

The bank's new predictions said that the eurozone economy would contract by 0.5 percent rather than grow by 1.2 percent as it predicted in September.

Inflation in the 15-nation eurozone fell drastically in recent months to 2.1 percent in November after it hit a record high of four percent in July due to rocketing prices of oil and food.

The bank sets the inflation target in the zone as two percent to keep economy stable.

The zone's annual inflation forecast for next year would be 1.5 percent, while the prediction figure was 2.6 percent in September.

Amid deep financial crisis, rates reduction was big around the world.

The Bank of England axed 1.5 percent four weeks ago and is expected to cut big again on Thursday.

Sweden's central bank on Thursday cut its key interest rate by a record 1.75 percent to two percent to boost its economy hit by the global financial crisis.

The U.S., China, Australia and Switzerland have all repeated cuts recently.