By Ambrose Evans-Pritchard @ The Telegraph
Last Updated: 6:51PM GMT 05 Mar 2009
The European Central Bank has cut interest rates a half point to an historic low of 1.5pc and opened the door for extreme measures akin to the quantitative easing(QE) underway in America, Britain, and Japan.
“I don’t exclude anything,” said Jean-Claude Trichet, the ECB’s president. “We did not decide that this is the lowest level. We are studying additional non-standard measures.” Bond yields plummeted across the eurozone as the markets instantly priced in further monetary loosening.
None of the eurozone’s sixteen central banks have ever seen interest rates this low. The cut follows a collapse in industrial production over the last five months. The pace of deterioration has been faster than the early 1930s, when falls were mostly stretched over a longer period.
The ECB has torn up its growth forecast for this year and expects an unprecedented contraction 2.7pc for the eurozone. Even this may prove optimistic. Output fell 1.5pc in the fourth quarter and the picture seems to be going from bad to worse. Export orders for German engineering companies fell 47pc in January. Link to full article
