The European Central Bank said it does not plan to cut interest rates this time around. The surprise large cut by the US Fed is not enough to stir the ECB to cut rates. Yet, speculation abounds.
Although some investors have hoped that an interest rate cut from the ECB would be forthcoming, with the hopes that it would help stimulate the falling economies, the cut is not what the ECB plans to do.
Instead, they are focusing on increasing inflation across the euro zone and therefore will not make the cut.
According to Austrian Chancellor Alfred Gusenbauer, as reported in Bloomberg.com, "What is right in the US can be wrong in Europe because the situation is so different." In addition, later he said, a rate cut "would have been a negative sign of panicking."
The largest problem within the euro zone, according to the ECB is inflation which has risen to above the goal of 2 per cent, mainly due to increasing energy costs and food prices.
Other investors believe that while the European Central Bank may not be looking at the housing market just yet, it is believed that over time, they will need to turn their attention to these equity markets and at that time will need to cut rates to compensate.
Still, at this conjuncture, no rate cut for the ECB is likely.
