--- by Stuart Williams --- FRANKFURT (AFX) - The European Central Bank's surprise decision to cut interest rates by 50 basis points yesterday means it can wait until early next year before relaxing its monetary policy again, economists said. They added that by cutting rates by more than the widely expected 25 basis points, the ECB has calmed market speculation about future moves and earned itself a breathing space. "The decision to do 50 certainly buys the ECB some time," said Guillaume Menuet, economist at 4Cast Analysis. "It pushes back the timing of the next cut to January next year at the earliest." HSBC Trinkaus economist Lothar Hessler said he expects some 50 basis points of more cuts next year. "They will now wait until next year unless nothing dramatic happens ... but it's much too early to forecast the end of the cycle." Before yesterday's rate decision the ECB had come under heavy criticism from the financial markets for not cutting rates sufficiently to combat the economic slowdown in the euro zone. It had also been scolded by euro zone finance politicians for not using room for manoeuvre in monetary policy to stimulate growth, which slowdown-hit fiscal policy could not exploit. "In this way (the 50 basis points cut) the ECB could attempt to limit speculation about further reductions beyond the end of this year," said Commerzbank economist Michael Schubert. In a second surprise move yesterday, the ECB said it will in future only make interest rate decisions at the first of its bi-monthly meetings, replacing the current format where decisions are made twice a month. This will mean the bank is able to hold on at least until the governing council meeting on Jan 3 next year, without stretching the patience of the markets, economists said. Most economists believe the economic landscape in the euro zone is sufficiently bleak to force another rate cut, even though the expectations have now been put back. In yesterday's news conference ECB president Wim Duisenberg said growth in the third and fourth quarters this year will be "very low indeed" and the economy will take longer than previously thought to recover from effects of the Sept 11 US attacks. More data about the severity of the slowdown has also appeared since the last meeting, and economists believe the ECB should be especially concerned by the euro zone confidence figures issued earlier this week. Inflation also appears to be on course to fall below the ECB's stability ceiling of 2 pct, which Duisenberg said will be "safely" met in the course of 2002. "The lights are still green for the next ECB rate cut," said HSBC's Hessler. "The economic perspectives are too negative and inflation is still falling." The main fear for the euro zone now is that recovery of the US economy will take longer than expected, battering the the domestic European economy and especially Germany, he added. According to Sharda Dean of Merrill Lynch: "Continued falls in inflation and business confidence will help to trigger further cuts." Another factor to watch in the months ahead will be the behaviour of Europe's finance politicians towards the fiercely independent ECB, economists said. Diplomatic sources have said politicians were intentionally much more tight lipped in the run up to yesterday's meeting, after seeing that pressure on the ECB can be counterproductive. Economists said the absence of pressure in the run up to this meeting was a significant reason why the ECB chose to cut yesterday, and not at its meeting in Vienna a month ago. "The ECB has been under much less political pressure over the past 10 days," said Merrill Lynch's Dean. "This allowed them to cut without undermining their political independence." However immediately after the rate decision, Belgium's combative finance minister, and president of the euro group, Didier Reynders indicated the political pressure may not be over. He said that anything less than the 50 basis points cut "would probably have been badly received" and it is still up to the ECB to help stimulate the economy. "There is more room for manoeuvre on the monetary side than on the budgetary side," he said. "That remains true."