European Central Bank policymakers meet in Frankfurt today in the shadow of a market-boosting 50 basis point cut by the Federal Reserve last night. The Fed last night lowered borrowing costs in the US to a 41-year low of 1.25pc, stating that "greater uncertainty, in part attributable to heightened geopolitical risks", was inhibiting spending, production, and employment. Both the Dow Jones and the Nasdaq closed 1.1pc higher following the cut, having eased into the red ahead of the announcement.
The bigger than expected move increases pressure on the ECB and the Bank of England, which also meets today, to reduce their lending rates. But although most agree that the eurozone needs a rate cut, a number of commentators say a cut now would be largely for the benefit of Germany and not the 12 nation bloc as a whole. The Bank of England may lower its lending rate by at least 0.25pc to 3.75pc today, according to economists, but the ECB is expected to wait until next month, or perhaps early in the New Year, to make its first cut since November 2001. //www.fxcentre.com