REUTERS POLL PREDICTS EUROPEAN CENTRAL BANK WILL CUT INTEREST RATE IN MARCH

London - The European Central Bank (ECB) is expected to cut interest rates by up to half a percentage point when it meets next week, according to the results of a Reuters poll of leading economic experts. Over 70 per cent expect a cut in March an increase from 33% in a similar poll conducted in January.

The Reuters poll of 53 economists from across Europe highlights growing concerns of the risk of stagnation across the region. Of those polled, 38 said they expect the ECB to cut the current interest rate of 2.75 per cent on 6 March. A cut by half a percentage point was though likely by 23 of respondents, and 14 expecting a cut of a quarter point. Only 10 felt the bank would leave rates unchanged.

Expectations have changed considerably since a similar Reuters poll in January when only 18 out of 54 polled expected a cut in March. Expectations have been affected by comments last week from ECB President Wim Duisenburg of growing uncertainty in the euro area and the prospect that its growth targets would be met.

"Duisenberg appears to have given up hope of a recovery later this year," said Dieter Wermuth at UFJ Bank in Frankfurt. He added, "It is clear that the euroland economy is at the brink of or perhaps already in recession. It is only a matter of time before inflation drops significantly."

If the bank does not act on 6 March, 44 of those polled said it would have to cut in April, probably by half a percent. The prospect of an inter-meeting cut forced by the outbreak of war with Iraq was also highlighted. Jose Alzola at Citigroup London said, "War could be a trigger for an inter-meeting cut, but it depends on how financial markets and oil prices respond."

Ruth Pitchford, Editor of Reuters Polling Unit, said: " The experts we spoke
to clearly felt that economic conditions in the euro zone remain challenging
and that uncertainty surrounding a conflict with Iraq is having a negative
impact on business and consumer confidence. In this context their views on
the European Central Bank have shifted, with the majority now certain that a
cut is firmly on the agenda for next week's ECB meeting."

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