Benchmark Rate of 3% Set for Euro Zone
Compiled by Our Staff From Dispatches
(International Herald Tribune)
FRANKFURT - The European Central Bank, in its last meeting before the
introduction of the single European currency on Jan. 1, confirmed Tuesday that it would set an initial benchmark interest rate of 3 percent for the euro zone.
Wim Duisenberg, president of the bank, which will manage monetary policy for the 11 countries adopting the euro, said there would be no further easing in interest rates in the euro zone for the foreseeable future. Three percent is the current benchmark rate in 10 of the 11 countries.
But some analysts said that the bank could cut rates, noting that it set its least expensive bank lending rate, the deposit rate, at 2 percent, less than the 2.5 percent for the comparable rate in Germany.
''A semi-rate cut adds to rate-cut hopes,'' said Holger Schmieding, an
economist at Merrill Lynch.
To limit market fluctuations amid expected heavy trading at the currency's debut, the bank set a narrow range for all its rates for the first weeks. The bank set a ceiling on the emergency borrowing rate, its most expensive rate, of 3.25 percent and a floor on the deposit rate of 2.75 percent through Jan. 21. After that, the emergency rate may rise to 4.5 percent and the deposit rate fall to 2 percent, the bank said.
The countries starting the single currency are Germany, France, Italy, Spain, Portugal, the Netherlands, Belgium, Finland, Luxembourg, Ireland and Austria.
All except Italy cut their benchmark rates to 3 percent on Dec. 3; Italy cut its rate to 3.5 percent. The central bank called the move a ''de facto'' establishment of the Jan. 1 rate for the euro. The bank said it intended to maintain that rate ''for the foreseeable future.''
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