The European Central Bank could cut interest rates for the second time in less than a month next week, ECB President Jean-Claude Trichet said this evening. (October 27th)
“I consider possible that the Governing Council will decrease interest rates once again at its next meeting on November 6th. It is not a certainty, it is a possibility,” Mr Trichet said in a speech at a banking conference in Madrid.
Although he declined comment on the size of any move, analysts firmed bets on a repeat of the 50 basis point reduction on October 8th, when the ECB acted with other central banks in a bid to stem the intensifying financial crisis.
Mr Trichet said financial market turmoil was putting pressure on economic growth in the short-term and this was also easing inflation fears.
Still, he stressed that the ECB would only reduce rates from their current level of 3.75 per cent if the inflation outlook justified such a move.
“Taking into account the recent decline in commodity prices together with the substantial weakening demand that has emerged lately, upside risks to price stability have diminished,” he said.
“Any new monetary policy stance that we could decide on at our next regular monetary policy meeting must continue to allow us to tell our 320 million fellow citizens: ‘you can be confident. We will deliver price stability in line with our definition of less than but close to 2 per cent in the medium term’,” Mr Trichet said.