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Euro zone production falls again putting interest rate pressure on ECB

Euro zone production falls again putting interest rate pressure on ECB
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The latest euro zone economic performance figures hinting at a recession ahead put further pressure on the European Central Bank to consider a cut in interest rates. They are currently at 2%. The further falls in industrial output and production will inevitably lead to renewed calls for ECB President Jean-Claude Trichet to stimulate the region’s economy.

In his most recent pronouncement Trichet again rejected that idea. He said: “The level of interest rates is very low by historical standards, both in nominal and real terms, lending support to economic activity. “We will remain vigilant with regards to all developments which could imply risks to price stability over the medium term.” But some economists say the ECB should be considering whether the lack of signs of an economic recovery are sending a signal for lower rates, particularly given the area’s high unemployment and weak business confidence. If the ECB did decide a rate cut was needed, inflation would not be a problem as it was stable in April. The recession talk comes after output in the euro zone shrank for a second month running. Industrial output for the 12 countries fell by a seasonally adjusted 0.2% in March, compared with February. It was down by 0.1% against the same month last year. In February production was down by 0.6% month-on-month The European Commission’s Economy minister Joaquin Almunia said on Thursday that he is hoping growth will pick up in the coming quarters as oil prices ease.