By Meera Louis and Christian Vits
Nov. 11 (Bloomberg) -- European Central Bank council member Guy Quaden said he expects the bank to reduce its forecasts for economic growth and inflation ``substantially'' next month, paving the way for lower interest rates.
``It's more than probable'' that the ECB ``will have to modify substantially its projections in December for growth and inflation,'' Quaden told Bloomberg News late yesterday in Sao Paulo. ``It's surely not excluded that the revision of the projections will have consequences on the field of our monetary policy.''
The ECB last week lowered its benchmark rate by half a percentage point to 3.25 percent, the second cut in less than a month, as evidence mounted that the financial crisis is driving the 15-nation euro area into recession. The International Monetary Fund on Nov. 6 predicted the region's economy will shrink 0.5 percent in 2009. The ECB will publish revised growth and inflation projections at its next policy meeting on Dec. 4.
``The transmission of the financial crisis to the real economy has strongly accelerated in recent weeks, affecting very negatively the prospects for economic activity in particular in the euro zone,'' said Quaden, who heads the Belgian central bank.
Quaden attended a meeting of central bankers from around the world in Sao Paulo under the auspices of the Bank for International Settlements.
The Bank of England lowered its benchmark rate by a third to 3 percent last week while the Federal Reserve has reduced its key rate to 1 percent and signaled it's ready to take borrowing costs to the lowest level on record.
To contact the reporters on this story: Meera Louis in Sao Paulo at mlouis1@bloomberg.net; Christian Vits in Sao Paulo at cvits@bloomberg.net
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