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ECB − Preparing for a rate cut
Thu, Oct 2 2008, 16:36 GMT
by Søren Dijohn
Overview: The ECB left leading interest rates unchanged but is preparing for a rate cut. At the press conference they softened the tone on economic growth and stressed the downward risk to growth stemming from the financial turmoil. They also softened the tone on inflation and dropped their key policy phrase "On the basis of our assessment, the current monetary policy stance will contribute to achieving our objective", indicating that there has been debate on this in the Governing Council.
Details: The tone in the growth section was a lot softer than previously. Downside risks "have increased". Recent data now "clearly confirm that economic activity is weakening" and they added (for the first time) "with contracting domestic demand and tighter financing conditions". Previously the ECB stated that the economy "is currently experiencing an episode of weak activity". Now "lower oil prices and ongoing growth in emerging markets might support a gradual recovery in 2009. Finally, today they said that "the world economy as a whole is feeling the adverse effects of the financial market turmoil". This is clearly downbeat compared to the previous statement in which "growth in the world economy is expected to remain relatively resilient".
Published on Thu, Oct 2 2008, 16:39 GMT
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