Update: Draghi: Surprise ECB Rate Cut Was Unanimous Decision

–Adds Comments On Rate Move

FRANKFURT (MNI) – The surprise decision of the European Central
Bank to cut key interest rates on Thursday by 25 basis points was taken
unanimously by the Governing Council, said ECB President Mario Draghi.

The cut was justified by signs of weakening of demand and eroding
confidence, namely in the PMI polls, new industry orders and analysts’
forecasts, Draghi explained to journalists, adding that economy appeared
to be heading toward a “mild recession”.

Weaker economic activity should also dampen price pressures,
assuring that headline inflation will fall below 2% next year and remain
in line with price stability over the policy-relevant horizon, he said.

The central bank is confident that its decision is in line with
maintaining price stability, he said. “Long term inflation expectations
are anchored at 2%.”

“What we’re observering is we’re heading toward a mild recession
towards the year-end, whereby inflation will go down substantially in
the course of 2012,” Draghi elaborated.

“We concluded there was no threat to price stability were we to
lower interest rates by 25 basis point,” Draghi said, adding that “no we
don’t see deflation” either.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

[TOPICS: M$X$$$,M$$EC$,M$$CR$,MGX$$$,MT$$$$]