Philip Lane is responsible for drafting and presenting the proposed rate decision before it is decided by the 26 members of the governing council next week. Photograph: Eric Piermont/AFPThe European Central Bank has sent a clear signal that it will cut interest rates from their historic highs next week, as its chief economist brushed off fears that doing so before the US Federal Reserve could backfire.
The Swiss, Swedish, Czech and Hungarian central banks have already reduced the cost of borrowing this year in response to falling inflation. But among the world’s major economies, the Fed and Bank of England are not expected to cut rates before the summer and the Bank of Japan is considered more likely to continue raising them.
However, he said the pace at which the central bank lowered euro zone borrowing costs this year would be decided by assessing data to decide “is it proportional, is it safe, within the restrictive zone, to move down”. Mr Lane is responsible for drafting and presenting the proposed rate decision before it is decided by the 26 members of the governing council next week
“That mechanism means that for any interest rate we set, you get extra tightening from the US conditions,” he said, indicating the ECB might have to offset this with extra cuts to its short-term deposit rate. “All else being equal, if the long end tightens more, then how you think about the short end changes.”
Source: Loan Digest (loandigest.net)
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