Eurobank hints at interest rate cut

A member of the European Central Bank’s governing council suggested today that the bank could cut interest rates by as much as a half percentage point next week, more than a year after it last made a change.

“If we see no negative aspects for price developments in the middle term, we could possibly make an interest rate move,” said Ernst Welteke, who is also the head of Germany’s central bank, the Bundesbank.

The eurobank council meets in Frankfurt next Thursday.

“Now there will certainly be deliberation whether the time has come for a rate cut and, if so, whether by 25 or 50 basis points,” he said, referring to a quarter- or half-point cut in the ECB’s key refinancing rate. That rate has stood at 3.25% since November 2001.

Welteke’s unusual direct reference to a possible cut followed a similar signal from bank President Wim Duisenberg after the bank’s 18 member governing council left interest rates unchanged at its last monthly meeting.

Duisenberg said then that the council had “discussed extensively the arguments for and against a cut in the key ECB rates.”