ECB to cut by 75bps says Citi

It is virtually certain that the ECB will cut rates again at its December 4 meeting after the Governing Council Meeting, predict analysts at Citigroup. Compared to the November meeting, the ECB has more “facts and figures” regarding the downturn of the economy and disappearing inflation risks, including the latest staff projections that are likely to show substantial downward revisions of GDP and inflation forecasts. However, some Governing Council Members have objections against unusually large rate cuts.
Citi analysts expect a larger cut than the “normal” 50bps, but expect the ECB will cut by 75bp rather than 100bp. However, they do not rule out a 100bp cut and expect further easing in early 2009 – with rates down to 1.0% or even lower.