The European Central Bank (ECB) will cut interest rates by half a point before the end of March as eurozone growth flags and inflation subsides, economists say.
In a
Reuters
survey done out this week, the mid-range of 26 forecasts showed the minimum bid refinancing rate at 2.75 per cent by the end of next March from 3.25 per cent currently.
"The economy is going to deteriorate faster and the ECB, although reluctant to deliver another substantial cut, will have to catch up by the first quarter of next year," said Mr Lorenzo Codogno at Bank of America in London.
"We are looking for the first cut in December, but there is a clear risk they will not deliver. So, they will have to do the whole lot in the first quarter".
In its November bulletin the ECB said it was confident inflation would fall below its 2 per cent target next year, and gross domestic product would grow below its potential rate of around 2.5 per cent for part of the year.
But the bank said current interest rates were appropriate to ensure price stability and favourable to recovery.
Many economists disagree, saying real interest rates are too high to kick-start the economy. Real rates are about 1 per cent, based on an October inflation rate of 2.4 per cent.