On Thursday these revised expectations were not disappointed when the Bundesbank announced that its official Lombard rate and discount rate would both be cut by 0.5 of a percentage point to 5.5% and 3.5% respectively. These are the lowest levels for these interest rates since January 1989.
Central banks in Austria, Belgium, Denmark and the Netherlands followed the Bundesbank's lead and also cut their key interest rates.
Although sterling is no longer tied to the deutschemark bloc of currencies, these moves could have an impact on the course of UK interest rates. If they allow sterling to rise a little over the next few weeks, that would be another factor supporting the chancellor's view that higher rates are not needed.