More reductions are expected. The two components of monetary policy show us that price stability is not in danger. The growth in money supply has clearly slowed down. That's the first thing. Central banks typically adjust benchmark interest rates to accelerate or slow the economy as needed.
Lower rates stimulate the economy by making it cheaper for businesses to borrow money.
Stefan Schneider of Deutsche Bank Research in Germany says the ECB has resisted lowering rates so far because it wants to show that it can act independently of politicians and EU member-governments in setting monetary policy. He says this leaves the bank with little choice but to lower rates. Maybe that's one factor why, for the time being, the bank has been reluctant to cut rates. But we think the evidence that the external slowdown will have an effect on the euro-land economies is really increasing by the day. This was to have been a second year of strong expansion in the European Union as foreign investment boomed and exports grew.