The ECB has always found a way to perplex analysts. After various calls from European leaders to be more proactive and help boost the economic recovery the Central Bank has cut the base rate in 25 basis points.
The European rate now stands at 1.25%. The market was expecting at least a 50 basis points cut given the deepening recession. As more and more Central Banks get near the point where the interest rate as a monetary tool is limited and have to engage in quantitative easing.
It remains to be seen if the G20 summit in London will have an effect on ECB policy going forward. The Euro has traded down after the announcement and will continue to look for direction from G20 comments.
