Trichet hints no cut in January

Advertisement

BBC economics editor Hugh Pym asked Mr Trichet how much worse the situation can get.

European Central Bank (ECB) president Jean-Claude Trichet has hinted there will be no European interest rate cut at the January meeting.

The rate cuts that have already been made still, "need to be transmitted... to the real economy", he said in an interview with the BBC.

The ECB cut eurozone rates from 3.25% to 2.5% at its meeting last week.

Mr Trichet also warned European governments to be careful about borrowing close to their agreed limits.

He warned of a loss of confidence once countries near their maximum amounts.

"If you are at the limit of what you can do, you can lose more with loss of confidence than you would gain from the additional spending," he said.

The EU's Stability and Growth Pact limits countries' budget deficits to 3% of their output.

Some European countries have called for that rule to be eased.