The crucial central bank meetings begin on Tuesday with the Reserve Bank of Australia and the U.S. Federal Reserve, followed by the Bank of England and the European Central Bank both of which will announce their decisions on Thursday. Three are expected to lower their policymaking interest rates by at least 25 basis points.

Analysts are hoping that the European Central Bank also will respond to the increasing evidence of a sharp EMU economic slowdown by cutting interest rates from their current 3.75 percent level. However this is by no means a certainty. The ECB knows that if they don't cut, the reaction will be awful. However, the ECB thinks that a massive dose of monetary expansion is not going to be that helpful in stimulating growth. The Bank has been under public pressure from political leaders to cut interest rates as soon as possible, but senior bank officials have made it plain that such pressure is unhelpful and even counter-productive, especially for a young central bank trying to establish its credibility and inflation fighting credentials. The latter looms large as January 1, 2002 approaches and the euro becomes the everyday currency for the European Monetary Union. Prices will be converted from francs, drachmas, lira, etc. to euros, and there is the possibility that prices will jump in the rounding process.

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