will the ECB cut rates

[woody234]

If the ECB cuts interest rates will it stop the pound stirling from falling against the euro and if so are they likley to cut rates or is it their great  mission to have 1 euro = 1 pound eventually

[Sprogster]

The fact is Woody, that neither the ECB, Bank of England or the Fed Reserve are in control of what is going on and an interest rate cut by the ECB is not likely to have much impact.

The main reason the £ is falling is that international investors are turning their backs on the UK market as after America, the UK is seen as the next country most vunerable to a collapsing housing market and resulting escalation of loan defaults.

What could happen is if the US$ and £ continue to fall, the central banks might try and co-ordinate intervening in the currency markets to stabilise a situation that is rapidly getting out of hand.

The ECB do not want an overvalued Euro, far from it, as it is highly damaging to the EU economy, as exports become increasingly uncompetitive. For example, with Airbus they are looking at moving manafacturing out of Europe, as who are going to buy their products if you can buy a Boeing in $ at half the price!

Worrying times indeed.

[andyh4]

As a slight counter to Sprogster's comments, the ECB are caught between a rock and a hard place.  They want to keep interest rates at current levels in order to control inflation but they are concerned about the damage of an over strong euro.  So far the inflation rate arguement has won out, but Sprogster is right that the whole situation is out of control just now, so a change of tack is not impossible.

[woody234]

I wonder if it would be cheaper for the FED and BoE to pay of everyones mortgages rather than pumping billions and billions in to the global markets hoping that some where or some how or some magic will come out the other end to help people pay their  mortgages if they get into difficulty