June 4, 2012
The European Central Bank will meet Wednesday amid growing signs of economic distress in the euro zone and louder calls for the bank to cut rates as uncertainties build around the currency bloc.
Although a rate cut this week can't be ruled out entirely, the central bank is likely to hold off this time while potentially starting to prepare the ground for a rate cut at its next meeting in July or later.
But the central bank's resolve will be seriously tested in coming weeks. Fresh elections in Greece on June 17 and crucial talks among European leaders on the future of the euro at the end of the month will likely intensify the debate about the ECB's future role and policy.
At a recent European Union summit, the ECB's independence came openly into question, with some leaders putting pressure on the central bank to do more to support growth and help restore the health of the region's banks.
While ECB President Mario Draghi is likely to hold fast to his position and put the onus on politicians to act, he may also be forced to acknowledge the economy in the 17-nation euro zone is worsening.
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