Receding worries about inflation have made room for another interest rate cut by the European Central Bank, Governing Council member Ewald Nowotny told Japan's Nikkei newspaper. Europe is facing major difficulties and the euro zone economy could
contract next year due to the impact of the financial turmoil, Nowotny was quoted as saying in the paper's Wednesday morning edition. Inflation expectations, on the other hand, are receding, making room for another ECB rate cut, said Nowotny, who is also governor of the Austrian central bank.
On the euro's recent weakening against the dollar, Nowotny said the dollar's current rises were unsustainable and that rapid currency moves should be avoided. Two quick-fire 50 basis point cuts since October have brought benchmark euro zone interest rates to 3.25 percent. Analysts think they could fall to 2 percent or lower next year if the region's recession evolves into a major long-term slump. The ECB next meets on Dec. 4.
Thursday, November 27, 2008
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