BERLIN (MktNews) - The European Central Bank (ECB) will cut its key rest rate by 50 basis points in the coming months, the renowned an economic research institute RWI forecast in its latest economic rt released Wednesday.
"Given the tightening of monetary policy (by the ECB) last year, e currently exists a substantial need for loosening," the n-based RWI -- one of Germany's six leading economic research itutes -- said in its report.
"The ECB will cut interest rates by half a percentage point in the ng months, and capital market rates will rise somewhat following an omic recovery," RWI forecast. The ECB's minimum bid rate on its main nancing operation is 4.50%. Its last move, a 25 bp cut, was May 10.
But if the eurozone economy slows more significantly, the RWI ses the ECB to cut even more.
"In the case of a further downward drift of the (eurozone) economy, tary policy (makers) should resolutely use their leeway for interest cuts," the RWI said.
The institute admitted, however, that "given the large time lag of impact from (interest rate) steps in realistic dimensions, the th (stimulating) effect would be modest in the short-term."
The institute does not see any major inflation risks in the zone.
RWI expects the eurozone's Harmonized Index of Consumer Prices P) to rise to 2.7% in 2001 before falling to 1.8% in 2002 after 2.4% 000.
The Essen-based institute expects wage agreements in Germany's r bargaining rounds next year "to stay moderate."
Commenting on the single European currency, the RWI forecast that euro's foreign exchange rate will "rise gradually against the ar." However, it did not give any time frame for this development.