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)

Published Thursday, January 15, 2009

By AP

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.

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