Time for the ECB to step up to the plate

IT came as no great surprise last Thursday that at the end of its monetary policy meeting, the ECB cut official interest rates by 0.25% for the second month running.

This brought the key refinancing rate back down to 1%, fully reversing the two 0.25% rate hikes implemented earlier this year in April and July. This reversal of policy was triggered by the sharp slowdown in economic activity over the course of 2011.

The last eurozone recession ended in mid-2009 but the subsequent recovery in activity looks to have been moderate and short lived. Growth in GDP has averaged at less than 0.5% per quarter over the past two years and exceeded 0.4% in only two quarters.