M&G's Isaacs sees ECB halving rates in 2012

Continued pressures on the eurozone and an environment of falling inflation will prompt the ECB to lower interest rates from 1% to 0.5% this year, according to M&G's Stefan Isaacs.

Isaacs said the central bank will also eventually launch a version of quantitative easing more similar to that introduced by the US Federal Reserve. As widely expected, the ECB held rates at 1% yesterday, having cut by 25 basis points in both November and December to bring the base rate back to its record lows. "I think the ECB will be forced to cut to 0.5% in 2012 as inflation falls," said Isaacs, manager of M&G's £1.1bn High Yield Corporate Bond and £1bn European Corporate Bond funds. Preliminary estimates produced by Eurostat on 4 January showed eurozone inflation falling back t...