Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more


  • Comment
On Thursday the Bundesbank cut German interest rates by half a per cent. Although most economists had expected a ra...
On Thursday the Bundesbank cut German interest rates by half a per cent. Although most economists had expected a rate cut, many were taken by surprise at the speed of the monetary easing. The move was probably a response to slower than expected money supply growth and easing inflationary pressures in the last month.

M3, the broad monetary aggregate, has risen in only one month this year, and consumer price growth looks set to decline towards the official target level of 2%

Weak German industrial orders data also revealed further weakness in the economy, and heightened fears of a move back into recession without an official move to boost the economy.

German interest rates are now at their lowest level for more than six years. The discount rate (which sets the interest rate floor) was cut to 3.5%, while the lombard rate (which acts as an effective ceiling to rates) was reduced to 5.5%. Other countries whose currencies are closely linked to the D-Mark followed the Bundesbank move, with monetary easing in Austria, Belgium, the Netherlands and Denmark. The Bank of France is expected to lower its key short-term interest rate later this week.

Earlier last week the US Federal Reserve Board decided not to reduce interest rates, but pressure is likely to mount for a cut at it's September 26 FOMC meeting. Kenneth Clarke, chancellor of the exchequer, and Eddie George, governor of the Bank of England, meet on September 7 to discuss UK interest rate policy, and an interest rate rise seems less even less likely as European monetary policy relaxes further.
  • Comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions.

Links may be included in your comments but HTML is not permitted.