: Interest Rate News : ECB cuts rates

ECB cuts rates

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Submitted By: host | Added On: 10/23/2007 | Total Views (458) | Total Downloads: (2)

Whilst the move was not surprising, the size caught some pundits "on the hop" as the FOMC decided to lower rates by a full half of one percent to 4.75%, at its September meeting. The first reversal of trend in 4 years. Whilst it typically takes 18 months for the full impact of any move to be felt, let's see how the markets treat the news as we move into the final quarter of 2007. As expected, The Bank of England's Monetary Policy Committee lowered  rates another 50 basis points to 1.5%, on 8th January, the lowest level since the central bank's founding in 1694, as policy makers fired yet another salvo in the battle against a deep and potentially lengthy recession.  Economists said the statement may point to a slowing of the pace of rate cuts as the benchmark moves closer to zero. The pound's sharp plunge in December, which sent sterling almost to parity with the euro, may have kept the central bank from taking more aggressive action, several analysts said. Whilst the European Central Bank set a new record low in reducing its key rate to 1.25% at the beginning of April, the new level is still not as low as the markets expected.  Most economists had expected a reduction of half a percentage point, to 1%. ECB President Jean-Claude Trichet said the decision was taken by "consensus" -- meaning that not all the governing council members supported the move. But the rate may go lower than 1.25%, he added. Expect to see further changes by all of the central banks over the coming months. As a result of the global economic malaise, interest rates are once again at extremely low levels historically. It is therefore definitely worth considering re-housing cash assets to more lucrative growth areas.

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