European Central Bank May Lower Interest Rate

The European Central Bank meets Thursday to consider lowering its benchmark interest rate. Twelve of the 22 economists surveyed by Bloomberg News predict the ECB will lower by at least a quarter point from 3.75%, although members of the rate-setting panel suggested last week they’re in no hurry to reduce borrowing costs.

The bank’s mandate is to keep the inflation rate below 2%, a goal it has missed for 16 months. The risk of doing nothing is that the economy will shrink. Germany’s economy didn’t grow at all in the second quarter.

The central bank has resisted increasing pressure from politicians to cut rates. ECB President Wim Duisenberg said at the European leaders’ meeting that he will lower rates again only if inflation slows further and faster than currently expected.

The ECB has lowered rates three times this year, most recently on Sept. 17, by half a point to 3.75%. The U.S. Federal Reserve reduced rates nine times and the Bank of England six times.