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ECB under rates pressure as Fed cuts and inflation falls
Published in Saudi Press Agency on 17 - 12 - 2008

European inflation fell sharply to 2.1 per cent in November, data released Wednesday showed, adding to the pressure on the European Central Bank (ECB) to press on with its interest-rate cutting cycle well into the new year, DPA reported.
The decline in the 15-member eurozone's annual inflation last month from 3.2 per cent in October came as falling oil and commodity prices helped to ease cost pressures.
The German statistics office also released figures confirming that inflation in Europe's biggest economy dropped to 1.4 per cent in November compared with 2.4 per cent in October.
The drop in eurozone consumer prices in November also took annual inflation down close to the ECB's target of 2 per cent with the Frankfurt-based bank delivering an historic 75-basis-points rate cut earlier this aimed at helping to spur growth in the currency bloc.
But since then, ECB chief Jean-Claude Trichet has left open whether the bank will lower borrowing costs again at its meeting set down for January.
Since the ECB's governing council's decision this month, Trichet has said that bank now needs to concentrate "on getting what we have decided operational", saying that the bank saw limits on far it could lower rates.
But with figures pointing to conditions in the eurozone economy worsening and central banks around the world stepping up their moves to cut rates, the ECB is likely to face growing pressure to continue trimming borrowing costs next year.
This is particularly the case following the dramatic 75-basis-points cut announced Tuesday by the US Federal Reserve, which slashed rates in the world's biggest economy to a target range of between zero and 0.25 per cent.


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