Germany Reduces Interest Rates to 7 1/2-Year Low
The Bundesbank on Thursday cut German interest rates to their lowest levels in 7 1/2 years, citing weak money supply growth, slow inflation and the effects of a stronger mark.
The move was the third set of interest rate cuts in 1995, continuing a three-year series of reductions. Bundesbank President Hans Tietmeyer wouldn’t rule out another cut.
“I will never say this is the end of the line,” Tietmeyer said.
The cuts came amid a wave of rate reductions across Europe, with the Bank of England cutting rates Wednesday and the Swiss National Bank reducing rates Thursday.
Once the Bundesbank acted, central banks in Belgium, the Netherlands, Denmark, Austria and Ireland followed suit.
“It was a move to support economic growth,” said Peter Lockhofen, who manages $4.6 billion of bonds at BFG Investment-Fonds-Gesellschaft. “It’s good now that it’s over with.”
The Bundesbank reduced its floor discount rate from 3.5% to 3%, the lowest since July 1988. The Lombard ceiling rate was also cut by half a percentage point, to 5%. The reductions take effect today.
The Bundesbank also cut the key German money market rate, the securities repurchase rate, to a fixed 3.75% for the next three weeks, from 3.98% this week.
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