Should Draghi Cut Record-Low Rates to Dampen Euro?
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Record high unemployment and falling inflation mean the European Central Bank (ECB) has scope to lower interest rates still further in order to weaken the spiraling euro, ING Senior Economist Carsten Brzeski, said.
"Past experience has shown the ECB hardly reacts to exchange rate movements… However, if the current trend continues and the euro further weakness the economic outlook, the door for a rate cut could be opened again," said Brussels-based Brzeski.
The ECB will report its latest monetary policy decisions on Thursday, and is widely expected to keep interest rates on hold at a record-low 0.75 percent. In a Reuters survey of 75 economists last week, none predicted a rate cut.
"Markets continue to overestimate the ECB's willingness to cut rates that are already at rock bottom levels, including if the euro goes up another few big figures, or Eonia creeps higher, barring any significant drop of economic forecast into negative territory," Sassan Ghahramani, chief executive of U.S.-based SGH Macro Advisors, told Reuters .
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