Don’t bargain on an interest rate cut just yet

THE ECB left its key refinancing rate unchanged at 1.5% at its monthly policy meeting last Thursday.

The eurozone economy appears to be teetering on the verge of a double-dip recession, while the euro sovereign debt crisis continues to deepen and is now giving rise to concerns about the stability of the banking system.

Inflation, though, has soared well above target, rising from 2.5% to 3% in September, leaving the ECB reluctant to reverse course and cut interest rates — the ECB increased interest rates by 0.25% in April and July in response to rising inflationary pressures.