ECB delivers second rate cut of the year
Updates with latest comments, prices
LONDON, Sept 12 (Reuters) -The European Central Bank cut interest rates again on Thursday as inflation slows and economic growth falters, but provided almost no clues about its next step, even as investors bet on steady policy easing in the months ahead.
The ECB cut its deposit rate by 25 basis points (bps) to 3.50%, as expected, following a similar cut in June, as inflation is now within striking distance of its 2% target and the domestic economy skirts a recession.
The euro briefly touched a session high after the rate decision and was last trading at around $1.1019 EUR=EBS. Government bond yields in the euro area were little changed DE10YT=RR, IT10YT=RR and European stocks held higher .STOXX.
Money markets priced in roughly 40 bps of further easing by year end.
COMMENTS:
LINDSAY JAMES, INVESTMENT STRATEGIST, QUILTER INVESTORS, LONDON:
"Today's news is sure to provide some relief to consumers and businesses which could help the continent on its way towards an improved economic recovery, but whether the ECB can cut rates again this year remains to be seen."
"The ECB has much less wiggle room than other central banks, so although a further cut in October is not entirely off the cards, the ECB will as always remain heavily reliant on the data that comes out between now and then."
"Ensuring inflation continues to head in the right direction, and particularly making more of a dent in core inflation, will be top of its agenda."
NEIL BIRRELL, CIO, PREMIER MITON INVESTORS, UK:
"The rate cut from the ECB was well telegraphed. They will be looking ahead to the prospects for growth rather than over their shoulder at inflation. It’s all about how steep the path to lower rates will be at the remaining meetings this year and through next year.
"Like most other regions, the euro zone economy could do with some stimulus, and this is a step along that path. Economic data over the next few weeks will determine the timing of the next policy move."
CARSTEN BRZESKI, GLOBAL HEAD OF MACRO, ING, FRANKFURT:
"Looking ahead, we expect the ECB to eventually step up the pace of further rate cuts. Not this year, but next year. Why not this year? Because currently, German wage negotiations and increasing selling price expectations still point to some stickiness of inflation. And given that the ECB’s track record of predicting inflation on its way up is rather weak, the ECB will want to be entirely sure before engaging in more aggressive rate cuts."
SYLVAIN BROYER, CHIEF EMEA ECONOMIST, S&P GLOBAL RATINGS, LONDON:
"As expected, the ECB has implemented a 25-bp rate cut with no additional policy guidance. With wage growth far outpacing productivity and service inflation picking up again, the Governing Council has no reason to accelerate the pace of cutting rates or committing to further rate cuts at this stage."
"The upcoming 35-bp reduction in the repo rate is unlikely to have a significant impact. While it may serve as a ceiling for money market rates in the long term, banks currently have little incentive to tap the markets, as their liquidity needs are being fully met by the ECB."
MARCHEL ALEXANDROVICH, ECONOMIST, SALTMARSH ECONOMICS, LONDON:
"As expected, the ECB cuts interest rates by 25 bps, and more or less, repeats its statement from June by 'not pre-committing to a particular policy path.'"
"The new forecasts show a combination of slightly weaker GDP growth and slightly higher underlying inflation."
"Overall, we think the ECB is laying the groundwork for further easing in Q4."
Reporting by the Reuters Markets Team; Editing by Amanda Cooper and Dhara Ranasinghe
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