Instant view: ECB cuts interest rates in surprise move

Thu Nov 3, 2011 9:19am EDT
 
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LONDON (Reuters) - The European Central Bank cut its main interest rate by 25 basis points to 1.25 percent on Thursday as the euro zone's worsening debt crisis outweighed concern over persistently high inflation.

ECB President Mario Draghi will explain the Governing Council's decision at a 1330 GMT news conference -- his first at a monetary policy meeting after taking over the reins on Tuesday from Jean-Claude Trichet.

COMMENTS:

MATTEO REGESTA, RATE STRATEGIST, BNP PARIBAS, LONDON

"Given the fact that markets were expecting maybe a more prudent stance given the Italian ties of the new governor, a rate cut was priced in by December but not by November fully, so it's an innovation in monetary policy and it has therefore produced a reaction in the market."

JOERG KRAEMER, CHIEF ECONOMIST, COMMERZBANK

"This is a complete surprise. We had expected a cut only in December. We thought it would take longer for the ECB to lower its overly optimistic economic forecasts.

"The move shows how unsettled the protectors of our currency are. They are taking very seriously the economic risks that stem from the sovereign debt crisis. The new ECB President Draghi is accepting that he will be labeled as an interest rate dove. That underlines the seriousness of the situation."

PETER VANDEN HOUTE, ECONOMIST, ING, BRUSSELS   Continued...