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Eurozone rates lowered to 3.25% | Eurozone rates lowered to 3.25% |
(31 minutes later) | |
The European Central Bank has lowered its eurozone interest rates to 3.25% in an attempt to prevent a recession. | The European Central Bank has lowered its eurozone interest rates to 3.25% in an attempt to prevent a recession. |
The bank has reduced rates by half a percentage point from 3.75% amid increasing signs of slowing growth. | The bank has reduced rates by half a percentage point from 3.75% amid increasing signs of slowing growth. |
ECB president Jean-Claude Trichet said "exceptional challenges" lie ahead and inflation rates were set to go down. | |
The comments leave the ECB room for more rate reductions, especially after the Bank of England slashed UK rates from 4.5% to 3%. | |
ECB joined other central banks in cutting rates last month but some have argued that it has not acted swiftly enough to stem the growing crisis. | |
The last time ECB rates stood at 3.25% was in October 2006. | The last time ECB rates stood at 3.25% was in October 2006. |
Further cuts? | |
Some analysts had expected the ECB to make a sharper cut after the UK's dramatic reduction. | |
Mr Trichet said the ECB had discussed the possibility of a bigger rate cut on Thursday. | |
Some analysts say a further rate cut at the next ECB meeting in December is possible. | |
Also on Thursday, Switzerland cut its interest rates by a half percentage point, the second cut in a month. | Also on Thursday, Switzerland cut its interest rates by a half percentage point, the second cut in a month. |
The Swiss National Bank said it was cutting its the target range to 1.5-2.5%, and intended to hold the rate in the middle of this range. | The Swiss National Bank said it was cutting its the target range to 1.5-2.5%, and intended to hold the rate in the middle of this range. |
Following the cut in Swiss rates, Henrik Gullberg, an analyst at Deutsche Bank, said: "I am surprised, but it is clear central banks generally are determined to cut rates sharply now when the inflation threat is receding". | Following the cut in Swiss rates, Henrik Gullberg, an analyst at Deutsche Bank, said: "I am surprised, but it is clear central banks generally are determined to cut rates sharply now when the inflation threat is receding". |
The ECB cut rates by half a percentage point in October, as central banks worldwide, including the US Federal Reserve and the Bank of England, did the same in light of the worsening financial crisis. | The ECB cut rates by half a percentage point in October, as central banks worldwide, including the US Federal Reserve and the Bank of England, did the same in light of the worsening financial crisis. |
Slowdown | Slowdown |
In July this year, the ECB had raised rates to try to put a lid on growing inflationary pressures, but since then these pressures have eased considerably largely thanks to a sharp fall in oil prices. | In July this year, the ECB had raised rates to try to put a lid on growing inflationary pressures, but since then these pressures have eased considerably largely thanks to a sharp fall in oil prices. |
While inflation - a main focus of the ECB - is at 3.2%, it is coming closer to the target of under 2% following the recent contraction. | While inflation - a main focus of the ECB - is at 3.2%, it is coming closer to the target of under 2% following the recent contraction. |
"Inflation may go down to below 2.5% by year end," Natixis economist Ceric Thillier forecast. | "Inflation may go down to below 2.5% by year end," Natixis economist Ceric Thillier forecast. |
A series of economic data released this week has shown how economies across the eurozone are slowing. | A series of economic data released this week has shown how economies across the eurozone are slowing. |
On Wednesday, figures showed that retail spending across the eurozone dropped in September, as consumers tightened their belts. | On Wednesday, figures showed that retail spending across the eurozone dropped in September, as consumers tightened their belts. |
Retail sales dropped 0.2% from August, and by 1.6% compared with September 2007. | Retail sales dropped 0.2% from August, and by 1.6% compared with September 2007. |
And on Monday, the European Commission predicted that the 15-nation area would hardly grow in 2009, expanding 0.1%. | And on Monday, the European Commission predicted that the 15-nation area would hardly grow in 2009, expanding 0.1%. |
European indexes were lower in early afternoon trade following both the UK and ECB rate cuts. | European indexes were lower in early afternoon trade following both the UK and ECB rate cuts. |
The UK's FTSE 100 index was 1.9% lower, France's Cac 40 dropped 1.8% and Germany's Dax was down 2.1%. | The UK's FTSE 100 index was 1.9% lower, France's Cac 40 dropped 1.8% and Germany's Dax was down 2.1%. |