The European Central Bank may delay or even halt further interest rate rises if an expected Fed rate cut marks the beginning of an easing cycle in the United States, a senior executive at Fitch Ratings said today.
A US rate cut would be likely to push the dollar even lower against the euro, said David Riley, Fitch's group managing director of sovereign and international public finance.
"We will see the euro getting much stronger from where it currently is. That's like tightening credit policy. I think that will probably lead the central bank to delay or not make any further increases in interest rate."
The Fed is widely expected to cut its benchmark interest rates by at least 25 basis points on today - the first such move since mid-2003 - in a bid to stabilise jittery credit markets and help stave off an economic recession.
"The Fed will be out of sync with the world's major central banks," Mr Riley said in an interview on the sidelines of a Fitch conference.
"I think in as much as the Fed cuts rates, signals that there are good expectations of further interest rate cuts, what's going to happen then is the dollar is going to get weaker," he said.
The ECB held off raising rates at a meeting earlier in September, leaving its benchmark rate at 4 per cent.
Many economists still expect a rise to 4.25 per cent by the end of this year.
European Central Bank policymakers have recently voiced concerns about inflationary risks and said that they were keeping alive the chance of an interest rate rise once the turmoil on financial markets abates.
The US credit market turmoil has hit the dollar, which stayed close to its record low versus the euro today and remained weak against a basket of six major currencies.