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To: Goldbug Guru who wrote (2985)	12/4/1998 2:52:00 AM
From: Goldbug Guru	Read Replies (1) \| Respond to of 37507

Europeans cut interest rates By Rex Nutting, CBS MarketWatch Last Update: 11:46 AM ET Dec 3, 1998 NewsWatch WASHINGTON (CBS.MW) -- European central banks cut their key interest rates to 3 percent Thursday as they aligned their monetary policies for the conversion to a unified currency beginning on Jan. 1. Germany, France, Italy, Belgium, the Netherlands, Luxembourg, Spain, Finland, Ireland and Austria and Portugal cut their rates in a coordinated move. Italy's key rate was cut to 3.5 percent, but the others all moved to 3 percent. The European Central Bank said the cuts should be seen as the "de facto decision on the level of interests" that would govern Euroland for the "foreseeable future." See text of release. Hans Tietmeyer, head of the German Bundesbank, said at a news conference that the move was in response to a slower growth outlook for Europe, not political pressure. The Bundesbank cut its repo rate to 3 percent, but kept two other key rates steady. The German discount rate is 2.5 percent and the Lombard rate is 4.5 percent. Tietmeyer said inflation was not a concern in Europe. The rate cuts were widely expected, only the timing was a surprise, said John Williams, economist at Bankers Trust. "The only real question was whether the [European Central Bank] would cut rates early next year or if they would be handed a lower rate to start out with," he said. The move is only the first of many, said Sherry Cooper, chief economist at Nesbitt Burns, because it "breaks a significant psychological barrier -- no longer is the onset of EMU seen as an impediment to lower interest rates in core Europe." She said Britain, which is not joining the monetary union, will likely follow with a rate cut next week. Mixed reaction Markets in Europe were trading higher before the rate cut after the Bundesbank said it would hold a press conference later, fueling speculation of a coordinated cut. The rally accelerated after the announcement at 8 a.m. Eastern time. See World Markets. The dollar was nearly unchanged against the deutsche mark, but lower against the yen. See foreign exchange rates. The U.S. Treasury market lost a portion of their gains on the news, but were able to hold most of the overseas advances. See Bond Report. U.S. markets opened lower, but would have probably headed sharply lower if not for the coordinated rate cuts, said Williams. See Market Snapshot.