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Eurozone awaits lowest interest rates

05 March 2009 12:52 (UTC +04:00)

Bakuâ€“ APA-Economics. The eurozone is set for record low interest rates as the European Central Bank (ECB) meets Thursday to coax 16 afflicted economies back to health, analysts say, AFP reported.
The ECB’s main lending rate now stands at 2.0 percent but that is almost sure to fall to 1.50 percent before the ECB releases fresh growth and inflation forecasts by eurozone central bank staff, which are also expected to be revised lower.
December’s growth estimate was deemed obsolete almost upon its release and the previous mid-point forecast of a 0.5 percent contraction this year will certainly be cut sharply, possibly to minus 2.0 percent.
Eurozone GDP shrank 1.5 percent in the last quarter of 2008 and is forecast to slump further early this year, while inflation remains tame at 1.2 percent, well below the ECB’s target of just under 2.0 percent.
The Bank of England (BoE) is expected to cut its own interest rate from 1.0 percent to 0.50 percent in London, also a record low for the 315-year-old bank.
Analysts there will focus on plans to pump more cash into the recession-hit British economy via measures known as quantitative easing or QE -- basically running money printing presses overtime -- to encourage activity.
Elsewhere, the US Federal Reserve and Bank of Japan’s main rates are essentially already at zero, and the Fed has begun to buy commercial paper directly from businesses in a classic example of quantitative easing.