Money supply growth in the euro zone kept in line with the European Central Bank's reference value in November, the ECB said yesterday. The ECB reported that its key money supply measure, the three-month moving average of 12-month M3 growth rates, was 4.7 per cent in the three-month period ending November compared with 4.6 per cent for the similar period ending October.
The ECB said the November figure was "very close" to its so-called reference value for desired M3 growth of 4.5 per cent.
The data emerged a day after ECB chief economist Mr Otmar Issing said the euro zone faced a marked economic slowdown.
Economists said the cooling, a delayed effect from the Asian and Russian economic crises which have weakened global demand, will combine with low inflation to pave the way for an ECB rate cut, probably in early 1999.
"We expect an ECB rate cut in the first quarter, probably February, to 2.75 per cent or 2.50 per cent due to a combination of an economic slowdown and the absence of inflation," said Mr Ulrich Beckmann, senior economist at Deutsche Bank Research.
In a recent Reuters poll, 32 economists predicted a median value of 2.75 per cent for the ECB's primary monetary tool, its two-week refinancing facility, by end-1999.
ECB data released yesterday showed that on a monthly basis the euro zone's M3 money supply growth rate slowed to 4.5 per cent in November compared to 5.0 per cent in October.
Economist Ms Petra Koehler at Dresdner Bank in Frankfurt said the month-to-month slowdown in growth is a good sign, indicating that euro zone money supply growth is tending closer toward the ECB's 4.5 per cent reference value.
