The European Central Bank (ECB) might cut interest rates again soon as the eurozone debt crisis deepens, but it will continue to insist that it is up to governments to find a lasting solution, analysts say.
ECB watchers predict the central bank — which will hold its regular policy-setting meeting on Wednesday instead of Thursday, owing to a public holiday — will not alter borrowing costs just yet this month.
However, it could act next month as deepening fears about Greece and possible contagion to other countries push the 17 countries that share the euro back into recession, the analysts predicted.
Photo: Reuters
“The further escalation of the eurozone crisis has intensified the pressure on the ECB to take further remedial action,” Capital Economics chief Europe economist Jonathan Loynes said.
“But while [ECB] President [Mario] Draghi may hold open the prospect of further support of the region’s banks after the meeting on June 6, he is likely to insist again that it is up to national policymakers to address their broader economic and fiscal problems,” Loynes said.
The ECB has never hesitated to act, from the very beginning of the crisis.
It quickly reversed last year’s rate hikes to bring eurozone borrowing costs back down to an all-time low of 1 percent and embarked on a hotly contested program of indirectly buying up the bonds of debt-mired countries.
Most recently, in two so-called long-term refinancing operations in December last year and February, it pumped more than 1 trillion euros (US$1.25 trillion) into the banking system to avert a dangerous credit squeeze in the eurozone.
“Can the ECB fill the vacuum of lack of action by national governments on fiscal growth? The answer is no,” Draghi said again during a hearing at the European parliament last week.
The ECB says that its overriding priority, even in times of crisis, is to keep a lid on inflation in the single currency area.
The latest data indicate that price pressures are indeed under control — area-wide inflation slowed to 2.4 percent last month from 2.6 percent in April and in Germany, the bloc’s biggest economy, inflation slowed to 1.9 percent, its lowest level in 17 months.
Further up the inflation pipeline, too, the money supply expanded by just 2.5 percent in April, a sharp slowdown compared with the previous month, despite the huge amounts of liquidity pumped into the system via the ECB’s anti-crisis measures.
“With the inflation threat receding, the ECB has more scope to stimulate the economy,” Berenberg Bank chief economist Holger Schmieding said.
The ECB will also publish its latest quarterly staff projections on inflation and economic growth on Wednesday.
They are likely to be revised downward, “leaving the door open for further policy accommodation,” Newedge Strategy analyst Annalisa Piazza said.
She saw a “60 percent chance” that the ECB would trim its rates by a quarter of a percentage point to 0.75 percent as early as this month.
Nevertheless, “the timing of a rate cut is highly uncertain,” the analyst said.
While the “weaker fundamentals and increasing stress in financial markets fully justify a quarter-point cut this week, the ECB might decide a later cut is the best tactical option” because borrowing costs are already at record lows and the full effects of the anti-crisis measures have yet to unfold, she said.
Schmieding, too, saw a “good case” for a quarter-point rate cut.
However, the bank would probably wait until next month, by which time the outcome of the Greek parliamentary elections on June 17 will be known, the economist said.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day
Thousands of parents in Singapore are furious after a Cordlife Group Ltd (康盛人生集團), a major operator of cord blood banks in Asia, irreparably damaged their children’s samples through improper handling, with some now pursuing legal action. The ongoing case, one of the worst to hit the largely untested industry, has renewed concerns over companies marketing themselves to anxious parents with mostly unproven assurances. This has implications across the region, given Cordlife’s operations in Hong Kong, Macau, Indonesia, the Philippines and India. The parents paid for years to have their infants’ cord blood stored, with the understanding that the stem cells they contained