An image of the planned new headquarters of the European Central Bank in Frankfurt. The construction is expected to be completed by 2011.

The Governing Council of the the European Central Bank (ECB) will meet today in Frankfurt, and is expected to keep interest rates on hold at a record low level of 1% due to the slow recovery in Europe. However, it is expected that the ECB will announce its next steps in its gradual withdrawal from emergency lending to Eurozone banks.

The ECB will return to competitive bidding to set the interest rate on three-month loans at some point this year, which would raise costs for banks in the 16- member country Eurozone. The central bank is expected to continue providing unlimited financing on a shorter-term basis, given concerns about Greek debt and indications that some institutions are still dependent on central bank support.

Bloomberg reports that the ECB may lend covered bonds back to financial institutions for a fee as part of a strategy that would ease banks’ access to funds. The proposal comes as the ECB tries to withdraw the emergency measures used to fight the financial crisis without spooking investors concerned about Greece’s record budget deficit. While the €39 billion of bonds held by the ECB is equivalent to just 5% of the total currently loaned out to banks, the new plan would give them more collateral to lodge with the ECB in return for funds.

Eurostat, the EU's statistics office, reported on Wednesday that in January 2010, the volume of retail trade decreased in the month by 0.3% in both the Eurozone (EA16) and the EU27. In December 2009 retail trade rose by 0.5% and 0.2% respectively. The agency reported on Tuesday that Eurozone annual inflation is expected to be 0.9% in February 2010 according to a flash estimate. It was 1.0% in January.

The Bank of England, meeting in London, is expected to leave its benchmark interest rate unchanged at 0.5% - - the lowest since the bank was founded in 1694.

Greek bonds rally as further fiscal measures equating to 2% of GDP announced: Davy analyst, Stephen Lyons, commented today - - "Greece yesterday announced further fiscal measures amounting to an additional €4.8bn or 2% of GDP. The measures are split between increased taxes and spending cuts and are targeted at achieving the objective of reducing this year's deficit to 8.7% of GDP. The European Commission backed the targets, stating that Greece was now on track to meet its target for deficit reduction this year and could count on EU solidarity.

Markets reacted positively, with the yield spread between Greek and German ten-year bonds falling to 284bps, down from 305bps. Credit default swap rates also fell to 306bps from 320bps. However, sentiment is still fragile with Greece yet to see firm support from other Eurozone countries. The German chancellor yesterday stated that a meeting with the Greek prime minister on Friday would not be about aid commitments."

Economic View; Addressing the pension timebomb part of the fighting the fiscal crisis:Goodbody chief economist,  Dermot O’Leary, commented - - "While it doesn’t have the immediate beneficial impact on the public finances, like, say, public sector pay cuts, this pension reforms announced yesterday are an important part of solving this gradual worsening problem (see Financials piece for more details on the specific scheme). The younger age structure of the population in Ireland gives the country a window of opportunity to address the issue of a ticking pension’s timebomb that is common to most developed countries over the next number of years. However, the announcements yesterday steal a march on many other European countries.

In Ireland, it is projected that the cost of public pensions will increase by an average of over 1.2% of GDP every five years for the next forty year period. In the context of Ireland struggling to reduce its structural deficit, this is not an inconsequential increase in pension costs. These structural changes would have had to take place in any case but it is likely that the pressures associated with a fiscal crisis expedited the process. Measures such as those announced will not prove popular for many workers under the age of 50, but they prove once again that Ireland is willing to enforce significant changes to solve the problems that it faces. Given that the reforms will be phased in over a number of years, it is still open to question what impact it will have on economic activity. However, in light of the current environment of self-help being forced upon countries with fiscal difficulties, it is a welcome step from that perspective."

Greece is making the right steps toward cutting its budget deficit and investors should be careful of shorting the euro versus the dollar, Stephen Gallo from Schneider Foreign Exchange told CNBC Wednesday. Maurice Pomery from Strategic Alpha joined the discussion:

US markets

In New York Wednesday, the Dow dipped 9 points or 0.09% to 10,397.

The S&P gained 0.04% and the Nasdaq was flat at 0% change.

Australia is a lucky country to be positioned so close to Asia, says Tim Harcourt, chief economist at the Australian Trade Commission. He assesses the country's trade links with Asia, with CNBC's Oriel Morrison.