ECB rate-cut momentum seen ebbing

By Korea Herald
  • Published : Mar 3, 2014 - 20:13
  • Updated : Mar 3, 2014 - 20:13
Euro-region economic reports in the past month turned out reassuring enough to convince most economists that Mario Draghi doesn’t need to cut interest rates this week.

With data on growth, inflation and economic sentiment all exceeding estimates, only about a quarter of forecasters in a Bloomberg News survey say the European Central Bank president and colleagues will reduce the benchmark rate from the current record-low 0.25 percent. Policy makers announce their decision in Frankfurt on March 6.

Draghi last week reiterated his stance that the ECB remains “alert” to risks from low inflation and stands “ready to act.” He has another opportunity to guide investors Monday when he breaks his pre-decision silence to testify to lawmakers. Officials now have new information on the economy that they sought in February when they kept rates on hold, along with quarterly forecasts prepared by staff.

“The pressure felt a month ago that might have led the ECB to be very aggressive this week has somewhat diminished,” said Jacques Cailloux, chief European economist at Nomura International Plc in London. “Business-cycle information is supporting the story of a modest recovery and inflation is broadly tracking the ECB’s December forecast.”

Data in the past week showed inflation held at 0.8 percent so far this year, exceeding both an initial estimate for January and economist forecasts for February. It remains at less than half the 2 percent level the ECB uses to define price stability. Officials predicted at the end of 2013 that inflation will average 1.1 percent this year. (Bloomberg)