Frankfurt, Dec. 2 (Bloomberg) -- The European Central Bank will probably lower interest rates for the first time in more than a year this week to spur faltering economic growth, analysts said. The ECB's 18 policy makers will reduce the benchmark rate by as much as half a percentage point to a three-year low of 2.75 percent when they meet Thursday, according to the median forecast of 30 economists surveyed by Bloomberg News. Consumer confidence in the region fell to the lowest level in more than five years this month, a European Commission survey showed Friday. Economic growth this year will be the least in nine years, the commission forecast, and inflation is slowing.
``The economic recovery in Europe has stalled,'' said Bernd Kubista, chief economist at the BVR association of German cooperative banks, which represents more than 1,500 lenders. ``Germany in particular will have a very bad start to 2003.'' German business confidence fell to a 10-month low in November. Deutsche Telekom AG, Europe's No. 1 phone company, this month posted the continent's biggest quarterly loss. German unemployment probably rose for the 19th month in almost two years, economists said a report will show Wednesday. At least 10 ECB officials, from Chief Economist Otmar Issing to Luxembourg's Yves Mersch, have signaled a rate reduction is imminent, saying they expect price increases to wane. The ECB aims to keep inflation below 2 percent. The rate slowed to 2.2 percent in November from 2.3 percent the previous month. Futures trading suggests the ECB will trim borrowing costs. The implied yield on the three-month Euribor futures contract due in December was unchanged at 2.92 percent. The March contract yielded 2.84 percent. A basis point is 0.01 percentage point. The ECB will announce its decision on Thursday.
Bank of England
On the same day, the Bank of England will probably say it left its key lending rate at 4 percent, the lowest in almost four decades, all the 30 economists surveyed by Bloomberg News said. The yield on the libor three-month interest-rate futures contract maturing next month is at 4.02 percent. ``Rates may still come down early in 2003, but only if the housing market shows clear signs of cooling,'' said Philip Shaw, chief economist at Investec Bank U.K. Ltd. The lowest borrowing costs since 1964 have boosted consumer spending and spurred growth in house prices, which surged 31 percent in October from a year ago, according to HBOS Plc, the U.K.'s largest mortgage lender. The day before the ECB's previous meeting on Nov. 7, the U.S. Federal Reserve reduced its target rate to 1.25 percent, the lowest in 41 years. The U.S. economy, destination of about a fifth of Europe's exports, grew an annual 4 percent in the third quarter, more than analysts predicted.
`Disappointing'
Some executives in Europe are becoming more optimistic. French manufacturers' confidence climbed for the first time in six months in November as executives said they plan to boost production to meet demand for consumer goods and cars. Italian and Belgian executives were also more optimistic. Still, ``the current economic situation in the euro zone is disappointing. Germany and the euro zone are close to stagnation.'' ECB council member and Bundesbank President Ernst Welteke said in a speech at the University of Siegen on Friday. ``Price stability in the medium-term is not endangered.'' //www.quote.bloomberg.com