Central Bank comments suggest possible interest rate cuts

The Governor of the Central Bank John Hurley has told the Irish Financial Markets Association (FMA) that the ECB is monitoring the interest-rate situation very closely, causing more speculation about a possible interest rate cut.

Mr Hurley, a member of the European Central Bank's Governing Council, said Europe's economic recovery had not lived up to earlier expectations.

Speaking at a gathering of the FMA in Dublin, he said that late last year all the indicators suggested that Europe's economy was starting to accelerate, but the reality has proved disappointing.

He described the recovery as more sluggish than the European Central bank envisaged and that there is nothing to suggest that this situation is about to change.

Hurley attributes this to weakness of consumer spending, which he said has yet to show signs of improvement, and said that economic growth across the zone needed the active support of fiscal policy and structural reform.

He said that while inflation is favourable and interest rates are low, consumers in countries like Germany, France, and Italy are not responding as they remain uncertain about job prospects and security, and are saving more and spending less as a result.

The implication of Hurley's comments is that interest could be cut if Europe's big economies do not pick up soon.