Germany Sharply Cuts Two Key Rates: Move Surprises Financial Markets But Fails to Halt Do
BERLIN, May 11ÛÓThe German Bundesbank today surprised financial markets by sharply cutting two key interest rates. But despite U.S. hopes that the move would ease pressure on the ailing dollar, it fell again on currency markets.</br></br>The dollar initially jumped half a pfennig to 1.6765 marks, but the mark quickly made up the lost ground in European markets. The dollar was down 0.0050 to 1.6690 in late trading in New York.</br></br>Last week the Federal Reserve, Bundesbank and 15 other central banks spent an estimated $5 billion intervening in foreign exchange markets in an attempt to reverse the dollarÛªs steady slide this spring. Analysts here today speculated that the BundesbankÛªs cut will be followed hy another rate increase next week by the Federal Reserve, which could help to stabilize the dollar.</br></br>Despite today's sluggish performance by the dollar, U.S. officials greeted the BundesbankÛªs decision with enthusiasm in hopes that a stronger European economy will boost U.S. exports and help sustain the American boom.</br></br>"WeÛªve been asking the Germans to reduce interest rates for a long time,ÛªÛª said a senior U.S. diplomat. ÛÏWhat we're all really interested in doing is getting European growth back on track. ItÛªs the U.S. belief that lower interest rates will stimulate economic growth, and thatÛªs a See CURRENCY, Dll, CoL 3