Weak eurozone growth may prompt further ECB rate cuts, say economists

STAGNANT economic growth in the eurozone in the first two quarters of 2003 raises the prospect of a further interest rate cut of up to 0.5% in the months ahead, according to Alan McQuaid, chief economist at Bloxham Stockbrokers.

Although the figures have been superseded by more positive data since June, Mr McQuaid said that the ECB is likely to cut its official lending rate by another half percent to 1.5%, as the tentative recovery fails to live up to expectations.

Despite speculation that the rate cut regime was over in Europe, Austin Hughes, chief economist at IIB Bank, agreed that yesterday's weak GDP data "continues to hold out some prospect of a further ECB rate cut before year end, and suggests a markedly softer path for interest rates than is now discounted by financial markets".