Another step towards zero, but still no plan for QE

With the euro-zone recession deepening, the ECB is almost certain to deliver the 50bp interest rate cut that President Trichet signalled last month. What’s more, we expect hints of further cuts to come as concerns over rates reaching levels that are ‘too low’ are gradually overcome by the need to support the economy. But the Bank will still be relatively vague about the scope for unconventional measures to support the economy when interest rates can fall no further. This raises the danger that the euro-zone recession might be longer-lived than those elsewhere.