Economists are now certain the European Central Bank will cut interest rates again at its next meeting, the only question is how much.
ECB chief Jean-Claude Trichet’s blunt hint that a rate cut is possible, although not certain, at the next rate meeting on November 6 cemented expectations that the central bank is readying more ammunition to fire at the financial crisis.
Although Trichet would not be drawn on the size of the possible cut, using the past as a guide suggests it could be a repeat of Oct. 8’s half a percentage point reduction.
In June, Trichet flagged a quarter-point rate hike by saying that it was possible, although not certain that the ECB “could decide to move our rates by a small amount” — a qualification that was missing from Monday’s announcement.
”The absence of this language in today’s speech, suggests that the ECB President is leaving the door open to a bigger reduction,” Fortis Bank economist Nick Kounis said, tipping a half a percentage point cut to 3.25 percent.
Although the majority of its 25 rate changes have been by only 25 basis points, the pattern shows the ECB is more likely to be bold when cutting rates than when raising them.
Six of the nine rate cuts the ECB has undertaken since 1999 have been of 50 basis points, compared to only two of the 16 rate hikes.
The last two rate cuts, on Oct. 8 and before then in June 2003, were both 50 basis point moves — so the ECB could well go for three in a row.
Some have speculated that the ECB may even cut rates by 75 basis points, although it has never made such a large leap in its 10-year history, either up or down.
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ECB to cut rates, but by how much?
Posted by: Krista Hughes
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Inflation….
If the ECB lowers intrest rates it will stimulate inflation,, debase the euro currency and create more bad investments.
The ECB should increase intrest rates to prepare for the comming of hyper inflation (comming in 2-3 years)
The ECB should dump all their dollar deposits and US T bonds.
- Posted by Jack MichiganInstead of cutting rates they should raise them. Inflation will have a corrective influence on overrated mortages.
This in combination with stricter ruling to prevent high mortages for lower valued housing.
Seems to be the basis of the total financial crisis.
- Posted by van der MolenThe dollar is here to stay.
Regardless of what the ECB does or doesn’t do this week, the U.S. FRB will lower the federal funds rate, and thus the prime rate today (the second time since October 8th). I’m hoping that said rate will be cut by at least a half point (50 basis points). I think it will. The Dow Jones Industrial Average and other indices should respond appropriately, i.e., in a positive manner.
What I’m also “banking on” is that come January 20th & 3rd, the new Obama administration & 111th U.S. congress, respectively, will craft legislation aimed directly at eliminating most U.S. debt (especially that held overseas), by balancing the annual budget (FY 2009 deficit $1 Trillion) and paying down the national debt (some $12 Trillion). Speaker Pelosi, Majority Leader Reid and the democrat majority in the U.S. House and U.S. Senate, respectively, must deliver what Mr. Obama “asks” them to deliver…and quickly. This equates to stability & confidence…and then growth.
Mr. Obama will have an election “mandate” for his administration’s “request” of congress, i.e., perhaps 52%-54% of the popular vote and 300+ electoral votes (hopefully 350+).
The preceding simply means that high income individuals and businesses in the U.S. (and especially those escaping taxes overseas) will have to be taxed according to the model set forth in the U.S. Revenue Act of 1913 (which followed the ratification of the 16th Amendment to the U.S. Constitution). This model survived the Great Depression and two world wars.
To ensure model-dictated, prosperity-laden consumption by a severely overtaxed U.S. majority (middle class), high income U.S. individuals and corporations must cease to pay effective tax rates on personal income, net profits and capital gains that are far lower than the stated rates. This cessation must end sooner than later. The top marginal rates for the preceding must also be raised to comply with the aforementioned model. The bottom rates must be lowered.
Taxation (and bill paying) & prosperity (T&P) go hand-in-hand…assuming that the tax cutting idiocy kicked off by the Reagan administration and the U.S. congress in 1981 (and continued by Bush & Bush) is immediately reversed beginning in 2009. Americans experienced a taste of how T&P can work during the waning years of the Clinton administration. The Bush administration kicked taxation in the teeth, and likewise U.S. prosperity (using the Reagan administration model).
Mr. Reagan’s election “mandate” was a mere 50.7% (44 million) of the popular vote, and 489 electoral votes. Look what that “mandate” ultimately led to…a precipitous drop in the Dow of 40% just in the past several months.
OK Jack
P.S. Mr. McCain’s (several times stated) fiscal & financial “hero” is Mr. Reagan. That just about sums up the definition for surefire failure, Mr. & Mrs. Reader.
- Posted by OK JackThe US is bankrupt.
The ECB should follow its own policy and let the US clean their own mess.
(if they can)
China should also dump their US treasuries (they own 33% of the US treasuries)and dollar deposits before its too late.
The dollar is already a worthless currency that is totally debased by Greenspan and Bernake.
Greenspan and Bernake are not central bankers, they are printers. Printers of Money.
The US will not be able to recover from the mess the FED made and their cabal of financial leaders.
- Posted by Jack Michigan USA