ECB's Weber in Rate Cut Mode, Euro-Zone Growth May Near Zero

ECB's Weber said "if the economy cools, then rates have to come down rapidly so one doesn't risk falling behind the curve". He added that "interest rates have to be appropriate for the economic environment." Weber stressed that his comments should not be seen as referring to the ECB's current monetary policy deliberations as the central bank is in its one week blackout period ahead of next week's meeting, but the comments clearly indicate that even mega hawk Weber is in rate cut mode and we now see a 50 bp cut from the ECB next week.

In addition, ECB's Bini Smaghi also signaled at " a possibility" of another rate cut at their next meeting in November. He added that the ECB is reducing rates in line with its strategy. It seems officials are this week not quite sticking to the usual black out period and continue to prepare the ground for a cut next week. We are now looking for a 50 bps move as growth is confidence is eroding rapidly.

Meanwhile, ECB's Quaden expects inflation to fall, and does not see a depression as in the 1930's. Quaden also says that he believes it would be better to regulate the financial system on a worldwide level, if not on a Europe wide level. Quaden also sees Belgian GDP growth closed to zero in 2009 than 1 percent, adding to the view that the Euro zone is slowing quickly.