Money in Motion

How to Handicap a European Central Bank Rate Cut


The European Central Bank is meeting on Thursday amid a wave of grim economic data. Here's one expert's take on what will happen.

The Europeans may not be resolving their crisis, but it's sure not for lack of talking about it. and the question on investors' minds is whether they might at least cut interest rates to spur the sluggish euro zone economy.

Not likely, says Michael Plavnik, head of the short-term interest rate desk at Citigroup .

ECB to Cut Rate in February: Strategist

"I definitely believe the ECB will cut rates," but not until February, he told CNBC. "They just need to see inflation come off more, and more confirmation of weaker growth.

"I think this week, they'll take a pause and reaffirm their support for the economy and wait to see more numbers."

That approach is unlikely to give the euro a lift, in Plavnik's view, especially with U.S. growth starting to look respectable.

"U.S. growth seems to be the least impacted by the European slowdown," he says.

Plavnik thinks the euro could fall to 1.25 in the next three months, and to 1.20 by the end of the year.

You can watch the discussion on the videotape.

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