Economic indicators pile pressure on ECB

THE European Central Bank cut official interest rates by 0.5% last Thursday, bringing the total reduction in rates in the eurozone to 1% in the past month.

Against this background, it is hard to believe that the ECB hiked rates as recently as July. There has been a sea-change in its thinking on monetary policy since then, brought about by an abatement in inflationary pressures as oil prices collapsed and the eurozone economy hit recession, as well as worries about the deepening financial crisis.

It is clear that the ECB was not forward looking enough in terms of its monetary policy decisions in the earlier part of the year.