ECB chief economist plays down chances of January rate cut

FRANKFURT: The European Central Bank's chief economist downplayed the likelihood of an interest rate cut in January, saying that after three straight reductions, the ECB's room for manoeuvre is now very limited.

"Following the substantial rate decreases, the remaining room for manoeuvre is very limited and only allows for potentially small gestures," Germany's Juergen Stark said in a speech late Wednesday in southwestern Tuebingen.

His comments will likely cool markets that have been expecting lending rates to be lowered again by 0.50 percentage points in mid-January.

Faced with a recession in the 15-nation eurozone and inflation that has fallen rapidly as oil prices collapsed, the ECB has cut its benchmark rate by a total of 1.75 percentage points in the past two months.

Last week, a 0.75 per cent reduction, its biggest on record, brought the rate down to 2.50 per cent, following a coordinated cut of 0.50 percentage points with other central banks in early October and a second one in November.