ECB prepared to cut rates again if necessary

In a surprise move, the ECB cut its main refi rate by 25bps to 0.25% at its council meeting last Thursday. The deposit rate was left unchanged at 0%.

There had been some speculation that the ECB might signal that a rate cut was under active consideration in response to the unexpected sharp fall in inflation to 0.7% in October.

However, few expected that a rate cut would actually materialise last week. Indeed, only last month, some ECB council members felt that the case for a rate cut was not even worth discussing.