December 3, 2008

Europe expects rate cuts, more bad news

European financial markets were braced for large interest rate cuts across the continent in the wake of more bad economic news.

Financial Times reported the consensus in Britain was that the Bank of England would cut its official rate 1 percentage point, to 2 percent -- the lowest rate since the bank was founded in 1694.

In the eurozone -- most of Europe where the euro is the currency -- the European financial market was anticipating a 0.75 percentage point cut by the European Central Bank to 2.5 percent -- the biggest cut in its 10-year history, the newspaper said.

Willem Buiter of the London School of Economics and a former member of the Bank of England's monetary policy committee -- and chief economist of the European Bank for Reconstruction and Development -- told the newspaper the recession in industrialized countries would be so deep and prolonged that 0.0 percent rates might be reached by the middle of next year.