Euro-zone rate cut hopes rise

HOPES of a cut in interest rates across the 12 nations of the euro-zone intensified after doveish comments on Monday night from European Central Bank president Wim Duisenberg.

Analysts said there was now a very good chance that the ECB would reduce rates from the current 3.75% at its meeting on Thursday.

Duisenberg made plain that the inflationary outlook was benign and that euro-zone inflation would fall well below the ECB's 2% ceiling. Asked when, he said: 'It will be early next year, but then it will be well below and it will stay there.'

Elga Bartsch of Morgan Stanley said the comments were 'a clear message' that rates would be cut, probably by a quarter-point, but possibly by half a point.

The ECB last reduced rates, by half a point, on 17 September in a co-ordinated move with the US Federal Reserve. The Fed was widely expected to slash rates by another half-point to 2%.