Analysts expect European Central Bank to cut interest rate

Business Materials 3 March 2009 17:49 (UTC +04:00)

Azerbaijan, Baku, March 3 / Trend , A.Badalova/

Capital Economics analysts expect the European Central Bank (ECB) to cut interest rate by 50 basis points to 1.5 percent.

The next ECB meeting will be held on March 5. Last month, the ECB decided to leave the key refinancing rate unchanged at two percent.

"The expected decline in the ECB rate by 50 basis points is unlikely to be the last one," Capital Economics analyst for Europe Ben May told Trend . The recent macroeconomic reports showed that inflationary pressure in the eurozone continues to weaken, he said.

According to the European Union Statistics Agency Eurostat, inflation in the eurozone increased to 1.2 percent in February at an annualized pace, compared to 1.1 percent in January. Consumer prices in the eurozone rose by 1.6 percent last month.

According to the Capital Economics, inflation rate will remain below two percent at an annualized pace until 2010.

The ECB rate will be reduced to a level close to zero by the end of the year.

Since October 2008 the ECB has cut the basic interest rate by 2.25 percentage points. At the January meeting, the key discount rate was reduced by 0.5 percentage points to two percent.

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