ECB likely to cut rates within the next 6 months

The Director of the International Monetary Fund for Europe, Michael Deppler, has said that the European Central Bank may need to cut interest rates within six months in order to remain competitive and keep the economy growing.

This marks the first time that the IMF has placed a timescale on the long standing debate of the ECB lowering interest rates.

Current predictions are that the euro zone’s economic growth will slow to 1.4 percent in 2008, which is a slowdown of 0.8 percent from 2007.

Inflation however is likely to be below the ECB’s ceiling of 2 percent.

The current spiralling costs of oil and other core consumer prices has limited the amount of elbow room available to the ECB.

A combination of wages responding to commodity prices will help the current situation.

The IMF’s own forecasts reveal an altogether different picture as they are backing a turnaround in prices, especially in oil which they predict a rise consistently above the $117 per barrel mark.

That is why the IMF forecast, according to Deppler, is more acute to inflationary pressures and that is why he also predicts that an ECB rate is cut from the current 4 percent is likely to be seen in the next few months.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aAjtH0zNwG8w&refer=economy
http://www.guardian.co.uk/feedarticle?id=7478184

Story link: ECB likely to cut rates within the next 6 months