Draghi May Move Toward Rate Cut As Debt Crisis Worsen

German Logo of the ECB. (Photo credit: Wikipedia)

Draghi May Move Toward Rate Cut As Debt Crisis Worsens. The European Central Bank may edge closer to cutting interest rates to a historic low as the debt crisis tightens its grip on the euro economy and threatens to hurt global growth.

While ECB officials meeting in Frankfurt will leave the benchmark rate at 1 percent today, according to 32 of 44 economists surveyed by Bloomberg News, 11 predict a quarter- point reduction and one forecasts a half-point cut. With European governments struggling to fix a crisis that’s engulfing Spain and could force Greece out of the euro, pressure is mounting on the ECB to lower rates and introduce more liquidity support for banks.

The Group of Seven nations yesterday agreed to coordinate their response to Europe’s turmoil, which has tipped at least eight of the 17 euro-area economies into recession and damped European demand for foreign goods. ECB President Mario Draghi, who said last week the monetary union is “unsustainable” in its current form, could choose to withhold further stimulus until governments do more to tackle the causes of the crisis. ... Continue to read.

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