--Goldman's Cohen: ECB would cut rates only for econ reasons

By Liz Alderman, BridgeNews
Davos--Jan. 27--The European Central Bank would not be likely to cut interest rates as a response to easier Federal Reserve monetary policy, even if the Fed cuts its own rates by as much as 50 basis points at its Jan. 30-31 meeting, Goldman Sachs' Managing Director of Investment Policy Abbey Joseph Cohen said Saturday. "I think if the ECB decides to lower interest rates it will be because of economic activity here in Europe," she said in an exclusive interview with BridgeNews during the World Economic forum here.
* * * Cohen pointed out that while consensus expectations for United States economic growth and earnings have been coming down sharply over the past several months, no comparable adjustment has occurred in the consensus expectations for Europe.
If European growth expectations do begin to come in lower, and the ECB is concerned about the pace of economic activity, "that is what I think might encourage them to lower interest rates. I don't think they would do so just because the Fed is lowering interest rates, but because they felt they needed to for economic reasons," she said.
Cohen also dismissed analyses that view the euro-dollar exchange rate would be noticeably impacted by a further significant Fed rate cut. "Some of the discussion we've been hearing over last couple of days suggests the only variable that affects the exchange rate is interest rates, and that's not quite true," she said.
"There are many other factors involved, as well, and our own feeling is the currency is not likely to change dramatically as a consequence of interest rates," Cohen said.