FRANKFURT, (AFP) – The eurozone is set for an unprecedented third interest rate cut in less than two months when European Central Bank governors meet this week in Brussels, with the key question being, by how much?
With the eurozone in a full-blown recession and inflation in a free-fall, analysts say the ECB has plenty of leeway to reduce the cost of borrowing in what will be 16 nations when Slovakia joins in January. “The case for a rate cut of more than the customary 50 basis points (0.50 percentage points) has never been stronger,” said Bank of America economist Holger Schmieding last week. “In fact, we find it difficult to see any convincing argument against cutting rates by at least 75 basis points,” he added, an amount the ECB has never chosen before, though it was discussed last month. “Leading economic indicators are plunging at a record pace, inflation is tumbling and unemployment is soaring in the eurozone,” Schmeiding noted.
With the eurozone in a full-blown recession and inflation in a free-fall, analysts say the ECB has plenty of leeway to reduce the cost of borrowing in what will be 16 nations when Slovakia joins in January. “The case for a rate cut of more than the customary 50 basis points (0.50 percentage points) has never been stronger,” said Bank of America economist Holger Schmieding last week. “In fact, we find it difficult to see any convincing argument against cutting rates by at least 75 basis points,” he added, an amount the ECB has never chosen before, though it was discussed last month. “Leading economic indicators are plunging at a record pace, inflation is tumbling and unemployment is soaring in the eurozone,” Schmeiding noted.
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