Major German banks expect the European Central Bank (ECB) to cut its key interest rate soon, according to a new survey.

"We can expect a rate cut of 0.5 per cent," Mr Norbert Walter, chief economist of Deutsche Bank, said in the survey carried out by a German newspaper. This cut should be made in two stages, in the first and the fourth quarter, he said.

Commerzbank is predicting a cut of 0.25 per cent in the first quarter, bringing the rate to 2.75 per cent. "The economic situation is currently weakening in the biggest countries in Europe, while a rate cut would not exert any inflationist pressure," said Commerzbank's chief economist.

Mr Michael Heise, of DG-Bank, predicts a single rate cut, but not before the second quarter. Banking experts quoted by Die Welt agreed that the economic situation would peak in the second quarter, and that the inflation rate could then pass the one per cent barrier.