Britain, EU contemplate rate cuts

Britain recently became the latest European nation to entertain the possibility of interest rate cuts.  In its last meeting, held earlier this month, two of the Bank of England’s nine governors voted to cut the federal interest rate by 25 basis points to 4.25%.  There were other members who felt the interest rate cuts made economic sense, but should not be carried out because they would not be widely expected.  Additionally, the minutes from the most recent ECB meeting reveals it, too, is giving serious consideration to rate cuts.  Investors and traders, alike feel rate cuts by both central banks are becoming increasingly likely, reflected in changing bond prices.  The Financial Times reports:

On Wednesday the December Euribor future hit a record high, with the market pricing in about a 40 per cent chance of a cut in eurozone interest rates by the year’s end.  The euro has fallen 5 per cent on a trade-weighted basis since the start of the year, a sign of poor economic prospects, leading to market expectations of rate cuts.

Read More: Central banks flag rate cuts