ECB’s Draghi Leaves Rate-Cut Door Ajar

European Central Bank cuts forecasts for 2013 growth, inflation.

The European Central Bank cut its economic and inflation forecasts and President Mario Draghi said weakness will persist into next year, leaving the door ajar for further interest-rate cuts.

“Weak activity is expected to extend into next year,” Draghi said today at a press conference in Frankfurt after policy makers left the benchmark rate at a record low of 0.75 percent. “Later in 2013, economic activity should gradually recover as global demand strengthens and our accommodative monetary-policy stance and significantly improved financial market confidence work their way through to the economy.”

Much ‘Already Done’

“We will continue to look at the situation, but to some extent we have already done much,” Draghi said. “If you think from July to today, some countries’ spreads, or some sovereign bond yields, went down by 200 to 250 basis points. That’s much more than anything you can achieve by a reduction in the short-term policy rate.”

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