THE EUROPEAN Central Bank (ECB) could cut interest rates again at its next meeting on November 6th, ECB president Jean-Claude Trichet said yesterday.
"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. "New information is likely to indicate a further alleviation to upside risks to inflation in the medium term."
The ECB cut rates by half a percentage point in tandem with other central banks on October 8th and economists had already forecast further loosening by the end of the year as both growth and inflation cool.
Mr Trichet said weakening economic growth was easing inflation fears but stressed that the ECB would only ease rates further from the current 3.75 per cent if it felt 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, declining comment on the likely size of any move.
"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.
Euribor interest rate futures rose on his comments and analysts said there was now a strong argument for another 50 basis point [half percentage point] cut.
" can be seen as a clear signal, following last Thursday's mid-month ECB governing council meeting, that the council has concluded that there will be a policy rate cut on November 6th," said Barclays Capital economist Julian Callow.
"The main remaining question is the size of such action . . . We would be surprised if the ECB did not go along with the markets' current expectation, ie to lower the policy rate by 50 basis points on November 6th."
