ECB opens door to interest rate cut as outlook gets ‘worse and worse’

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Central Bank chief Mario Draghi said the forecast for the eurozone was “getting worse and worse” amid international trade tension.

The European Central Bank has opened the door to a further interest rate cut as well as additional stimulus measures as global trade tensions threaten the continent’s economic outlook.

It comes as the bloc struggles with a manufacturing recession particularly afflicting Germany, its largest economy.

Rates are already at or around zero but in its latest monetary policy announcement the ECB raised the possibility that they could be cut further in the first half of 2020, giving up a previous pledge that they would remain unchanged.

It has also asked staff to look at other options – which could mean extending the programme of hundreds of billions of euros of asset purchases it has already been using to boost the economy.

The guidance comes at a time when industrial production in Germany has been in sharp decline while the US Federal Reserve is also looking to cut rates.

Growing trade tensions between the US and China, the world’s two biggest economies, are weighing on the international outlook and were largely blamed by the IMF as it downgraded its forecasts for world growth earlier this week.

ECB president Mario Draghi said previous projections suggested there might have been a rebound in the European economy in the second part of the year but this was “less likely now”.

He said the outlook was “getting worse and worse” and that this “mainly reflects the ongoing weakness in international trade in an environment of prolonged global uncertainties, which are particularly affecting the euro are manufacturing sector”.

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