The European Central Bank cut the main refinancing

rate for the fourth month in a row, bringing the level to 2.00%. This was in line with market expectations, and, while we believed there was a large chance for the ECB to cut less than what they did, the disappointment was delivered during the post-decision press conference instead. There, President Trichet reiterated the Governing Council's expectation that the level of inflation will be in line with price stability over the medium-term. However, they now see the risks to that expectation to be broadly balanced, rather than just more balanced as they did in December. Moreover, President Trichet signaled that with the February meeting coming in just three weeks, there is likely to be no meaningful change in the Governing Council's sentiment until March at the earliest. While we believe the ECB will ultimately need to lower rates 50- 75 basis points from here, this will likely not come until the April to June period, as the evidence mountsfor the ECB that the economic weakness in the Eurozone will linger into the latter half of the year.