ECB rate cut possible following "serious" debate

Fri Dec 7, 2012 9:35am EST
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By Martin Santa and Eva Kuehnen

BRATISLAVA/FRANKFURT (Reuters) - A European Central Bank policymaker said on Friday the bank had had a "very serious" debate about cutting interest rates this week and that a cut was possible next year if the euro zone economy does not pick up.

The German and Austrian central banks separately suggested such a pick up is unlikely, forecasting scant growth in their economies in 2013.

The ECB kept interest rates on hold on Thursday, but Governing Council members held "a wide discussion" about cutting interest rates from their current record low of 0.75 percent.

Jozef Makuch, one of the Council members, used the term "very serious" on Friday to describe the debate.

"If the situation does not improve, and there is relatively a small chance there will be a significant improvement, it is possible to expect a move in interest rates next year," said Makuch, who is also the governor of Slovakia's central bank.

The latest growth forecasts paint a gloomy picture.

The Bundesbank expects Germany's economy to grow just 0.4 percent next year, down from a June forecast of 1.6 percent. The new projection is marked by "a high degree of uncertainty", it added, and "the balance of risks is on the downside".

Austria's central bank cut its 2013 growth forecast for the country's export-dependent economy to 0.5 percent from the 1.7 percent it had expected in June, due to the global downturn, weak investment and sluggish consumer spending.   Continued...

President of German Bundesbank Jens Weidmann reacts on the podium during the Frankfurt Euro Finance Week in Frankfurt November 19, 2012. REUTERS/Lisi Niesner