Daily analyst comments
ECB cuts base rate to 1%
08.05.09 10:47
Field: Economics & Strategies
The ECB has decided to lower its base rate by 0.25% to 1%. In our view, in the upcoming months, the bank will continue with its careful economic growth stimulation policy and keep the inflationary pressure of lower interest rates under control.
At a regular session on May 7, the ECB decided to cut its base rate by 0.25% to 1%. This has been the seventh in a series of rate cuts since October 2008. Since then, the rate has been reduced by 3.25%.
Speaking at a press conference, the ECB chairman noted that the latest economic data shows signs of economic stabilization; yet, economic activity in the euro zone remains feeble. The chairman referred to the current interest rate as adequate, given the complicated economic conditions, and added that further rate cuts were possible. The ECB head has announced plans to buy up to USD 80 billion worth of euro-denominated bonds on the market.
The ECB continues to stick to a more conservative economic stimulation policy as compared with other large central banks. Such a policy may drag out the economic recovery process, but it does lower inflationary risks. In our view, in upcoming months, the bank will continue with its careful economic growth stimulation policy, keeping the inflationary impact of these measures in check.