European Central Bank president Jean-Claude Trichet says the next move in European interest rates is likely to be down placing further pressure on Bank of England governor Mervyn King to cut rates next week.
The ECB left rates at 4.25 per cent at its meeting this month but Trichet, a notorious hawk on inflation who hasn’t cut rates in his five year tenure at the ECB, says a rate cut, probably a quarter point, was discussed.
Even discussing rate cuts at an ECB meeting is like breaking wind in church, so things must be bad.
Bank governor King and most of his colleagues on the Monetary Policy Committee have also set their faces against rate cuts, saying their prime duty is to control inflation (officially it is).
But the pressure from the politicians is becoming overwhelming and most analysts think the only argument next week will be whether to cut by a quarter or half a point.
The latter would be painful medicine indeed for King, an acknowledgment that rates should have been reduced earlier.
So they’ll probably go for a quarter point, too little too late.