Europe Expected to Cut Interest Rates

The European Central Bank probably will lower interest rates Thursday for a second time this year, as falling inflation gives the bank room to try to boost a slowing economy, analysts said.

The bank is likely to pare its main refinancing rate by at least a quarter point from 4.5%, according to 12 of 16 economists surveyed by Bloomberg.

With inflation receding and the economy sputtering, the ECB has greater scope to bolster growth by lowering rates, analysts say. The inflation rate in the 12 nations using the euro fell in the last two months, and reports from Germany and Italy suggest it’s likely to have dropped again in August.

German consumer prices fell 0.2% in the month to mid-August, the first decline in 10 months, figures last week showed.

The ECB aims to keep inflation below 2%. It has missed that goal for the last 14 months, making it harder to lower rates without risking higher prices. After the ECB’s rate announcement, ECB President Wim Duisenberg will hold his monthly press conference.

Still, a rate reduction isn’t guaranteed, some analysts said. Three Bundesbank council members--who advise ECB council member and Bundesbank President Ernst Welteke--recently said there is no immediate need for the bank to change rates.