`Global rate cut not the answer' - ECB

THE PRESIDENT of the European Central Bank (ECB) - which will determine European monetary policy from 1 January - yesterday ruled out Europe joining a co-ordinated global cut in interest rates.

Speaking to the European Parliament, Wim Duisenberg argued that interest- rate cuts were not the answer to the global economic crisis, which he believes will "dampen" European growth next year. The ECB chief said Italy, Spain and Ireland would all have to cut rates substantially before year- end.

Disappointing the City, Mr Duisenberg did not detail how ECB monetary strategy will work when it comes into force.

He said: "We in Europe are very much in the process of the run-up to monetary union. We don't want this process to be interrupted by moves in interest rates, co-ordinated with whoever, and especially not with those with significantly higher interest rates."

Mr Duisenberg's remarks were echoed later by Jean-Claude Trichet, governor of the French central bank and member of the ECB governing council. Mr Trichet said cuts were not on the agenda for France or other core European countries.

Mr Duisenberg yesterday repeated his view that European short-term rates would converge by the end of the year.

The ECB chief said the so-called "convergence rate" will be close to 3.3 per cent, the short-term rate prevailing in Germany and France. This implies a substantial loosening of monetary policy in Ireland, Italy and Spain, where rates are 6.19 per cent, 5 per cent and 4.5 per cent respectively.

City analysts expect the ECB's monetary policy strategy to be a combination of monetary growth targeting and inflation rate targeting.

David Mackie at JP Morgan said: "There is little difference, at least in practical terms, between targeting money supply and targeting inflation. If they cannot agree on this relatively simple question, how are they going to be able to agree on setting interest rates, which is much more difficult?"

William McDonough, a US Federal Reserve governor, said the balance of economic risks had shifted from inflation towards inadequate growth, reigniting market hopes of an early easing in US interest rates.

On co-ordinated cuts, however, Mr McDonough said there were "sufficient differences in the conditions of G7 countries that a co-ordinated cut in interest rates probably would not directly serve the purpose of sustained economic growth in each of the countries".

Outlook, page 19

Start your day with The Independent, sign up for daily news emails
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas