There have been a couple of significant developments
in relation to Euro area interest rates prospects
in the past couple of days, like the Swedish
Riksbank decision to cut its rates drastically, a
Reuters story on a split of opinion in the ECB regarding
a rate cut and the Minutes of the June BoE
meeting, showing two members voting for a rate
cut, whereas in May one member still voted for a
rate hike.
The rate cut by the Riksbank had been flagged well
in advance by comments from senior Riksbank officials
and so wasn’t a complete surprise. However,
the boldness of the move, a 50 basis point rate cut
and the motivation for the move were clearly not
fully anticipated and resulted in a further decline in
market rates.
Why does the Riksbank decision impact thinking on
ECB policy?
* Swedish Riksbank cuts rates by 50 basis points to 1.5 per cent
* Statement cites weakness of Eurozone activity as a key factor behind the rate reduction
* BoE Minutes show a shift in sentiment towards an easier stance
* ECB is apparently split on the wisdom of a further cut
* Upcoming confidence measures will likely be important for ECB rate outlook
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