Analysts See Europe, U.S. Cutting Interest Rates

Comments on Tuesday by Federal Reserve Chairman Alan Greenspan and European Central Bank Chairman Wim Duisenberg have many analysts expecting interest-rate cuts on both sides of the Atlantic as a way to stimulate the global economy while reducing the risk of deflation, news services reported.

If rate cuts spur consumer and business spending, it would benefit the entire economy, including trucking. Financial analysts who follow the trucking industry note that any cut can immediately reduce monthly interest expenses for some trucking operations, if they carry large floating-rate debt on their equipment.

Speaking to the International Monetary Conference via satellite from Washington, Greenspan characterized the probability of deflation -- a sustained fall in prices that can hurt growth -- as "low," but said it would be a main topic when Fed policymakers meet June 24-25, USA Today reported.

And while he expressed confidence in the U.S. economy, he suggested there is little downside risk to another interest rate cut as insurance against deflation.

ECB's Duisenberg said Tueday that inflationary pressures have declined significantly and that would be reflected in the group's deliberations when it meets on Thursday, the Wall Street Journal reported.

Financial markets interpreted these comments as a pledge that the ECB would cut rates, now at 2.5%, by at least a quarter-point, the Journal said. The ECB has cut interest rates twice in the past six months -- by a half-point in December and a quarter-point in March.

Meanwhile, since the Fed has little experience fighting deflation, Greenspan said policymakers were extraordinarily cautious to contain deflationary forces, USA Today reported.

Deflation is dangerous because as prices fall, profit margins are squeezed, forcing firms to eventually cut wages, the Journal said. Debts, whose values are fixed, become harder to repay.

Since early 2001, the Fed has cut interest rates 12 times to 1.25% in an effort to spur growth.