ECB could cut benchmark rate

[dipsydoodle]

Source: Associated Press

FRANKFURT, Germany (AP) -- The European Central Bank could step up its efforts against Europe's debt crisis by cutting interest rates on Thursday for the second time in five weeks, and by extending longer-term loans to ease financial pressure on struggling banks.

President Mario Draghi's post-meeting news conference will also be watched closely for any sign that the bank is ready to follow through on his hint that it could do more to help indebted governments by stepping up its limited purchases of government bonds.

That would be on the condition that European Union politicians first agree to tighten the eurozone's rules on government debt. Bigger bond purchases would be a big step that could lower borrowing costs for indebted countries such as Italy, the major focus of the crisis right now.

But a deal on new debt rules won't be sealed until a European Union summit the next day, at the earliest. So the bond question will likely remain open.

Read more: http://hosted.ap.org/dynamic/stories/E/EU_EUROPE_INTEREST_RATES?SITE=JRC&SECTION=HOME&TEMPLATE=DEFAULT

[DCBob]

1. Its about time.

Should have been done months ago.

[Ghost Dog]

2. EU "Summit Optimism" (Reuters)

... Optimism that policymakers would successfully address the euro zone debt crisis, and last week's announcement that coordinated central banks action would provide cheaper dollar funding for European banks, has helped boost investor confidence...

... The European Central Bank is expected to cut rates to 1 percent and unveil a new package of bank aid on Thursday, with markets also watching for any hint it will intensify its bond buying support. The ECB decision is expected at 1245 GMT.

France and Germany are to sound out European leaders about their plan to defuse the euro zone's debt crisis, eager to rally support before a high-stakes EU summit. The plans include tougher budget discipline. "There's anticipation of something solid, good news. You don't want to be short in case France and Germany put something significant together," said Yusuf Heusen, sales trader at IG Index...

... Strategists said the market was also pricing in the ECB starting quantitative easing... Jeremy Batstone-Carr, strategist at Charles Stanley, said the market could fall 6 percent if the ECB did not indicate it would print money and only "vague platitudes" emerged from the summit...

/... http://uk.reuters.com/article/2011/12/08/markets-europe-stocks-idUKL5E7N813W20111208

[muriel_volestrangler]

3. European Central Bank cuts interest rates back to 1%

The European Central Bank has cut interest rates back to their historic low of 1%, as expected by markets.

The quarter-point cut comes as crisis and recession threaten the eurozone.

The decision comes just ahead of a "do-or-die" Brussels summit of EU heads to hammer out a plan to save the euro.

All eyes will now be on the ECB President, Mario Draghi, at a post-meeting press conference. The ECB is also thought to be preparing a bailout for the Italian government.

http://www.bbc.co.uk/news/business-16082755

I wonder what the situation would be if Trichet hadn't raised the rate earlier this year. Some think markets took it as a sign that Trichet only cared about Germany's economy, and that made the Euro problems far worse.