BoE, ECB leave rates unchanged, Fed likely to cut

There was no change in interest rates yesterday from the BoE.

Nor from the ECB, although there was some tough talk from the ECB president. From Bloomberg:

European Central Bank President Jean-Claude Trichet signaled the bank won't cut interest rates and may raise them to contain inflation even as economic growth slows.

The ECB's Governing Council is "prepared to act preemptively so that second-round effects and risks to price stability do not materialize," Trichet said at a press conference in Frankfurt today after the bank kept its benchmark interest rate at 4 percent. He said policy makers will "not tolerate" an inflation spiral of rising prices and wages.

There was no such tough talk from Fed chairman Ben Bernanke yesterday. From Bloomberg:

Federal Reserve Board Chairman Ben S. Bernanke said more interest-rate cuts "may well be necessary" after 1 percentage point of reductions since September to buttress economic growth.

"We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," Bernanke said today in his first speech on the economy since the Fed's Dec. 11 meeting. Recent figures suggested the outlook for "2008 has worsened and the downside risks to growth have become more pronounced," he said.

The signal from Bernanke appears clear enough.

"From the tone of the speech, a 50-basis point cut seems likely," Lawrence Lindsey, a former economic adviser to President George W. Bush and ex-Fed governor, said from New York. Though it's "unlikely" the U.S. is in recession, Bernanke "is quite right to take precautionary measures right now," he said...

Futures prices indicate the odds of a half-point rate cut on Jan. 30 jumped to 90 percent today from 76 percent yesterday and 34 percent a week ago. Futures show a 100 percent chance of at least a quarter-point reduction.