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Eurozone interest rate cut to record low

(Agencies)
Updated: 2009-05-07 22:57

UniCredit chief economist Marco Annunziata said the ECB faced a "stress test" and that settling for a small rate cut and loan maturity extension "would be a mistake."

"The war against the financial and economic crisis is not won yet," he warned.

IHS Global Insight economist Howard Archer added: "The latest data from the ECB suggests that credit conditions are still tightening, which is damaging to economic activity and a threat to recovery prospects."

Beyond the probability of longer loan periods, he saw an ECB announcement that it would buy bank-issued bonds as a likely QE option.

Eurozone banks account for 70 percent of business financing, a much larger percentage than elsewhere, and the ECB has made it clear it wants them to remain at the centre of measures to get credit flowing again.

Deo at UBS said: "We indeed agree that securing banks' funding needs is a crucial task for the ECB."

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