MADRID (Spain) - THE European Central Bank appears poised to cut interests for a second month in a row after President Jean-Claude Trichet said on Monday there was 'a possibility' of such a move as inflation ebbs in the euro zone.
'I consider it possible that the Governing Council would decrease interest rates once again at its next meeting,' Mr Trichet said in a speech in the Spanish capital.
ECB announces one-week loans
FRANKFURT - THE European Central Bank announced on Monday one-week dollar loans against euro cash as part of its efforts to keep interbank money markets flowing.
The ECB said it intended to make 20 billion euros' (S$37.8 billion) worth of the US currency available during the so-called swap, which involves selling dollars on Wednesday and buying them back on November 5.
FRANKFURT - THE European Central Bank announced on Monday a currency exchange, or swap, agreement with the Danish national bank that amounted to 12 billion euros (S$22.36 billion).
The measure was designed to 'improve liquidity in euro short-term markets,' a brief ECB statement said.
The statement comes ahead of a meeting by the US Federal Reserve Bank on Tuesday and Wednesday in Washington. Policymakers there are widely expected to lower the central bank's key interest rate from 1.5 per cent at the conclusion of a two-day meeting Wednesday - their last session before the November elections.
Investors and some economists predict the Fed will drop the rate by half a percentage point to 1 per cent. If that happens, it would mark the lowest rate since the summer of 2004. Others, however, think the rate will be cut by a quarter-point to 1.25 per cent.
Mr Trichet was quick to warn that any rate cut was not set in stone and not yet decided upon.
'It is not a certainty, it is a possibility,' he said. But his admission sparked intense interest given his typical tight-lipped attitude about bank moves.
The bank last cut its interest to 3.75 per cent on Oct 8, part of a joint move with other central banks aimed at restoring some semblance of calm to global markets pocked with fear and concern over the financial meltdown.
'For a central banker, this is an unsually clear statement,' said Mr Michael Schubert, an analyst at Commerzbank in Frankfurt. He said the bank is likely to lower its benchmark rate to 3.25 per cent when it meets on Nov 6.
Mr Trichet, for his part, offered some conditions though.
'All our decisions are inspired by this fundamental primary objective: price stability. Any new monetary policy stance that we could decide on at our next regular monetary policy meeting must continue to allow us to tell our 320 million fellow citizens, 'you can be confident',' he told a luncheon of business leaders.
Mr Trichet said that diminishing pressure from inflation, currently at 3.6 per cent in the 15-nation euro zone, was not as great as it was.
He also said that the picture for growth did 'not offer a completely reassuring picture.'
Mr Trichet said the global crisis marked 'a period of intense turbulences which correspond to a very significant market correction at a global level.' -- AP
