# Should the ECB be considering reducing interest rates to align with UK / USA rates ?



## Panacea (6 Jan 2011)

Unlikely to happen given their previous comments however should they actually be considering this as an option? This does not even seem to be on the horizon as an issue to be considered or discussed by the ECB.

The comparatively lower rates may not necessarily have resulted in huge economic benefits accruing to UK/USA but I am not sure that there has been a significant downside.

The resultant theoretical exchange rate movements are a hardly convincing argument given the f/x size of the fluctuations against the dollar, sterling and swiss frank. The flight of capital whether from Irish savers or German savers has already been massive and looks like it is set to continue irrespective of ecb interest rate levels.

Lower interest rates could possibly help banks to keep a higher proportion of loans classified as performing assuming the resultant reduction in interest rates would flow through to repayment levels. Presumeably deposit rates would see a commensurate decrease (although lower deposit rates are unlikely to halt the flight of savings abroad or result in significant savings to the banks).

Are concerns about exports and inflation that serious to prevent any further reduction in ECB interest rates.

I don't fully understand or appreciate the finer details to be considered (pretty obvious from the above) but I would at like to have a clearer understanding as to why a rate decrease is such a no go area.


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## Sunny (6 Jan 2011)

No go because Germany is booming. Inflation concerns are beginning to creep into the Market. No chance of rates falling.


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## Purple (6 Jan 2011)

The ECB is mandated to keep inflation low. The Germans fear inflation (for historical reasons) and they run the ECB (and the EU). Yes, it's all about inflation.


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## Howitzer (6 Jan 2011)

Lower them to what? They're currently at 1%.


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## Panacea (6 Jan 2011)

Lower them to closer to current Bank of England rate of 0.5% or Fed rate in US which is 0.25%.


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