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02 December 2023

ECB expected to cut rates again as economic gloom deepens

 A giant symbol of the European Union's currency - the Euro - outside the headquarters of the European Central Bank (ECB) in Frankfurt in western Germany (AFP)

The European Central Bank is expected to cut interest rates again amid a persistent drip of increasingly bad economic news from the 16-nation euro zone.

The ECB cut its main refinancing rate to 2.5 per cent from 3.25 per cent in early December, and financial markets expect it to follow that with a somewhat smaller cut when it meets Thursday.

IHS Global Insight economist Howard Archer said he expected a reduction of a half percentage point, which would leave the ECB’s rates at 2 per cent. That would be its lowest level since December 2005.

Even though the ECB has reduced interest rates on three occasions since October from a high of 4.25 per cent, its actions have been dwarfed by the more aggressive cuts enacted by the US Federal Reserve and the Bank of England.