- Joerg Asmussen, ECB Executive Board member
During the last policy meeting the European Central Bank cut its benchmark interest rate by 25 basis points to a fresh low of 0.25%, citing weak inflationary pressure in the region, with CPI hitting a 47-month low in October. Even though the ECB does not have plenty of room for further adjustments of its monetary policy, like their Australian colleagues, they do not exclude the possibility that interest rates could go even lower, citing the readiness to act if needed. At the same time, people with knowledge of the debate, mentioned that policymakers would introduce a rate of minus 0.1% from zero for commercial lenders, who park excess cash at region's central bank. In this case it would be the first central bank cutting rate by less than a quarter of a percentage point.
Economists estimate that this month's inflation, due out later this week, would show a pickup to 0.8%. Despite a slight improvement from October's data, the level is still considerably below the official target of 2%. According to European Commission forecasts, autumn inflation would reach 1.5% this year, and would hold around this level during the next year, before easing back to 1.4% in 2015.
The growing uncertainty over ECB's future actions is weighing on the single currency, as EUR/USD is eroding Friday's gains, trading just slightly above 1.35.
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