ECB lagging, but rates have much further to fall

Following today’s decision to cut interest rates by 50bp to 3.25%, President Trichet’s comments confirmed that the ECB is not about to slash rates as aggressively as the Bank of England. Nonetheless, with the ECB’s earlier inflation worries paling into insignificance against a backdrop of sharply weakening activity, we expect interest rates to fall to a record low of 1.5% next year.

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