ECB Rate Cut Could Bring Big 'Disappointment'

Expectations are rising that the European Central Bank (ECB) will announce a rate cut when it meets next week. But according to analysts the move is likely to have a limited impact and could in fact end up being a disappointment. 


Wednesday's release of Germany's Ifo Business Climate index showed that business sentiment was weaker than expected in April, deepening concerns that Europe's largest economy is in decline. On Tuesday, flash purchasing managers' index (PMI) data showed that the euro zone's largest economy was stalling, prompting widespread speculation of an ECB rate cut on May 2.
"With the latest batch of weak PMI data, we are now of the view that the ECB is likely to cut its policy rate as soon as the next meeting in May," Barclays analysts said on Tuesday. The FTSEurofirst 300 Index extended gains on Wednesday after rallying 2.4 percent on Tuesday on hopes of a rate cut. A fall in Spanish and Italian borrowing costs and signs that Italy was nearer to breaking its political impasse also helped boost sentiment.