ECB hints at rate cut

ECB hints at rate cut
European Central Bank not worried about inflation, as U.S. impacts
March 23, 2001: 6:36 a.m. ET


LONDON (CNN) - The ECB is no longer worried about inflation, Bank of France Governor Jean-Claude Trichet said, hinting interest rates may be cut.

"While we were very concerned about inflation a month or a month and a half ago, we're not anymore today," Trichet, a member of the European Central Bank, told French radio station Europe 1 in an interview.

The ECB, which sets interest rates for the 12 nations that make up the eurozone, has been stubbornly arguing that internal demand would shield it against a slowdown in the U.S. and stagnation in Japan.

Trichet echoed comments of ECB Chief Economist Otmar Issing, who on Thursday gave the clearest sign yet that the ECB is leaning toward an interest rate cut, saying the economic outlook looked weaker.

Issing predicted that eurozone inflation, which remains well above the ECB ceiling of 2 percent, would come down amid signs that eurozone growth in 2001 will be hit by the economic woes in the U.S. and Japan.

Though central banks around the world have been lowering the cost of borrowing in recent months, the ECB, guardian of the euro, is worried that inflation remains above its 2.0 percent target.

The ECB last cut rates in April 1999. Eurozone inflation stood at 2.6 percent in February, up from 2.4 percent in January.

So far this year, the Bank of Japan and the Bank of England have followed the U.S. Federal Reserves' lead in attempting to head off an economic slowdown by easing monetary policy.

Most economists expect the ECB to leave its benchmark interest rate unchanged at 4.75 percent at its next?meeting on March 29. A cut of 0.25 percentage points is expected at subsequent meetings