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Business

ECB Rate Cut Will Boost Euro Zone

All the signs are there that the European Central Bank will lower its key interest rate for the first time in over a year.

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All eyes are on the ECB's guru, Wim Duisenberg, to lower interest rates.

Amid reports that the European Central Bank is poised to lower its key interest rate this week, the Association of German Banks (BdB) also threw its weight behind the expected move.

Most analysts say it is a foregone conclusion that the ECB will cut its refinancing rate by half a percentage point from 3.25 percent to 2.75 percent -- its lowest rate in three years -- following comments by a number of leading bank officials.

Confidence boost

In a statement, BdB said "the large majority of our economic and monetary policy committee believe that a half-point cut would be desirable this week."

The statement added that a decisive move would "restore confidence in the financial markets in the relatively short term, giving investor and consumer confidence a boost."

The ECB has kept its interest rate steady for more than a year due to concerns about the high level of inflation in the euro zone. However, those worries have abated following signs that inflationary pressure is easing.

The bank's president, Wim Duisenberg, conceded earlier this week that economic growth was stagnating in a number of key euro-zone countries, a clear indication, observers say, that the time has come to boost consumer confidence by lowering interest rates.

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