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ECB tipped to set the stage for March rate cut

Business Materials 5 February 2009 09:30 (UTC +04:00)

The European Central Bank (ECB) is expected to set the stage Thursday for a rate cut at its meeting in March, dpa reported.

ECB chief Jean-Claude Trichet has already indicated that the Frankfurt-based bank is likely to hold off on trimming borrowing costs again this week before pressing on with its rate-cutting cycle in March.

"The next important meeting is in March," said Trichet at his press conference last month after the bank delivered another 50 basis points cut. This brought the cost of money in the 16-member eurozone down to 2 per cent.

For the moment, the ECB appears keen to sit back and assess the economic impact of the 225 basis points in rate reductions it has delivered since October last year.

However, economists are divided about the size of the rate cut the ECB's 22-head governing council is expected to deliver in March.

While some analysts believe the normally cautious ECB will limit the March rate cut to 25 basis points, others are predicting it will deliver another more hefty 50 basis points reduction.

Analysts are also divided about how far the ECB will be prepared to go in trimming rates.

Some believe that the ECB's benchmark refinancing rate could be at 1 per cent or even 0.5 per cent by around the middle of the year.

But others are predicting that the bank will bring the current rate-cutting cycle to an end at 1.50 per cent.

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