Euro-Zone Data on Prices Clear Path for Rate Cut

Euro-zone producer prices fell at their fastest rate on record in October following another drop in energy costs, paving the way for the European Central Bank to cut interest rates again, official data showed recently. Producer prices slid 0.8% in October from Sept., the biggest monthly drop since records began in 1990, leaving them 6.3% higher than a year earlier, EU statistics agency Eurostat said. In September, prices declined a revised 0.3% from August and rose 7.9% from a year earlier. The euro firmed recently and European stocks gained ground on expectations that the PPI data could prompt the ECB to deliver a larger rate cut, which would help the 15-nation currency bloc recover from recession sooner. All 46 economists in a survey by Dow Jones Newswires said the ECB will cut interest rates; 31 said it will trim by half a percentage point. Twelve said the cut would be a deeper 3/4 of a percentage point, and there was one vote each for a 1/4-point cut and a full-percentage-point cut. One bank didn't issue a forecast. Many believe swiftly falling inflation rates and rapid economic deterioration justify a wider cut, but in recent weeks ECB officials telegraphed markets shouldn't expect anything beyond half a percentage point. In their view, bigger isn't necessarily better. A basis point is one-hundredth of a percentage point. The Bank of England and Sweden's central bank also are expected to announce rate cuts. Sweden's Riksbank moved its regularly scheduled meeting forward by two weeks, leading investors to predict that it will announce a substantial cut of up to one percentage point in its key interest rate.