The ECB’s rate cut: Better late than never

Posted: May 2, 2013 in economy
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RATHER like a royal court visiting its far-flung fiefdoms, the European Central Bank’s governing council gets out of its Frankfurt home twice a year. So it was in Bratislava, the capital of Slovakia, that the council today decided to lower its main interest rate, from 0.75% to 0.5%. The quarter-point cut was the first move since last July. It is better than nothing but will do little to kickstart the moribund euro-zone economy. The decision came as fresh signs of weakness emerged in the euro area, which has been in recession since late 2011. Figures out this week showed that unemployment rose in March to 12.1%, a new record. That overall figure masks big differences between the core countries in northern Europe and the stressed economies in the south. In Germany the jobless rate stayed at 5.4% whereas in Spain it rose still higher, to 26.7%.Hopes for a recovery in the first half of 2013 have been postponed to later this year. Today’s manufacturing survey from Markit, a research firm, showed the downturn deepening in April; the euro-zone PMI stood at 46.7 in April, a four-month low (any level below 50 indicates contraction). The supposed powerhouse of the European economy is looking distinctly underpowered:  Germany’s PMI stood at 48.1.With inflation also waning, from 1.7% in March to a three-year low of 1.2% in April (though this may prove a blip), the ECB had a free …

via Economic Crisis


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