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Eurozone weakness makes ECB interest rate cut more likely

Economists increasingly believe that the European Central Bank is about to cut interest rates for the eurozone.

The feeling is that Mario Draghi and his fellow policymakers could reduce the benchmark rate from 0.75 percent to 0.5 percent at their meeting next week to help the region’s economy which has slipped back into recession.

Adding to the momentum for a rate cut, the Ifo economic think tank’s German business climate index has just fallen for the second month running, the latest downbeat survey of companies.

Europe’s largest economy is being undermined by both weakness in its Chinese .. and eurozone export markets:

Rob Dobson, Senior Economist with business survey firm Markit, said: “We’re seeing the eurozone continue to remain in contraction territory, therefore the recession is ongoing. Any hopes that we would see a recovery early in the second quarter, these numbers pretty much end that hope.”

No recovery makes it likely the eurozone’s unemployment rate will rise above the 12 percent recorded in February, which was the highest since the euro was introduced in 1999.

European Central Bank President Mario Draghi said recently that it is “ready to act” in case economic indicators worsened. We will see next week if things are now bad enough for it to cut interest rates or if it will wait until the next policy meeting on June 6.

Copyright © 2014 euronews

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