3 January 2001, 14:17  The European Central Bank (ECB) is unlikely to cut interest rates in the coming months

BERLIN (MktNews) - The European Central Bank (ECB) is unlikely to cut interest rates in thecoming months unless the euro's exchange rate were to rise "significantly" above parity to thedollar, Deutsche Bank chief economist Norbert Walter said Tuesday in a newspaper interview. Walter also reiterated Deutsche Bank's forecast that the euro will rise above dollar parity withinthe next 12 months. "If we are right with our exchange rate forecast, then an interest rate cut is unlikely. If the (euro's)foreign exchange rate, however, significantly recovers beyond parity, then we will get lowerinterest rates," Walter told Germany's daily newspaper Welt. A U.S. hard landing and a "dramatic" lowering of interest rates by the Fed in response would alsomean "significantly" lower borrowing costs in Europe, Walter said. However, this scenario was"unlikely." Tax cuts planned by the incoming Bush government would have a positive impact on financialmarket expectations, Walter argued. "In the light of this outlook, a profound concern about a recession and dramatically lower interestrates in the United States appears to be unwarranted," he said. As a result, the euro's ongoing recovery could be slowed or even interrupted, according toWalter. In other comments, Walter said he expected euro-zone HICP inflation to slow to the ECB's2.0% inflation ceiling by mid-2001 -- from 2.9% in November -- due to lower oil prices and thecurrent economic slowdown.

© 1999-2024 Forex EuroClub
All rights reserved