War: panic 'could spark rate cut'

INTEREST rates could be cut even further if war panic grips financial markets. The European Central Bank hinted that it was ready to act if the fighting in Iraq sends shares crashing.

The ECB's governing council pledged to offer 'provision of sufficient liquidity' - which analysts took as a sign that rates could be cut from the present 2.5%.

Elga Bartsch, economist atinvestment bank Morgan Stanley, said: 'It underscores our viewpoint that the ECB could cut rates at any time.' The bank is predicting a 0.25% drop. The ECB is desperate to prevent the already stalling European economy from lurching into a further slump.

Switzerland's national bank said it was watching events closely. The Bank of Japan issued a similar statement shortly after the attacks on Baghdad began.