ECB policy makers will meet again on September 8th to decide on interest rates.
After two rises in 2011 – bringing the rate to 1.5% it is looking very likely that rates will not rise again for several months.
ECBPresident Jean-Claude Trichet acknowledged last week that developed economies face “formidable challenges”. He hinted that the ECB might reconsider its long-term inflation warning.
Today – Goodbody stockbrokers said that they now see the ECB cutting interest rates in 2012 by 0.5%, (down to 1%) .
Earlier this week – Jennifer McKeown, senior European economist at Capital Economics Ltd. said that the “chance of further interest-rate hikes has evaporated and a reversal of earlier increases now seems more likely. We have penciled in 25 basis-point interest rate cuts in December and March.”
Reuters – reported this week that ” Three-month Euribor futures — one of the main gauges of market expectations — show rates being cut to 1.25% as early as December 2012 and easing even further after that. They are not expected to return to their current 1.5 percent level until mid-2013.”
Also this week – Mohamed El-Erian, chief executive officer of Pacific Investment Management Co. said he thought that the European Central Bank will probably cut interest rates as the chance of a recession in the euro zone has risen to 50 percent.