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ECB reduces rates to record low | |
(about 3 hours later) | |
The European Central Bank (ECB) has cut interest rates in the eurozone to a record low of 1.25% from 1.5%. | |
The cut is smaller than was widely expected. Most economists had predicted half percentage point cut to 1%. | |
The ECB had already cut its key rate five times from 4.25% in October 2008 as it tries to boost economic activity amid fears of a long recession. | |
The unemployment rate in the eurozone rose to 8.5% in February, its highest level in almost three years. | The unemployment rate in the eurozone rose to 8.5% in February, its highest level in almost three years. |
Economists are also waiting to see if the ECB follows other central banks in moving towards quantitative easing. | Economists are also waiting to see if the ECB follows other central banks in moving towards quantitative easing. |
Both the Bank of England and the US Federal Reserve have introduced quantitative easing - whereby they increase the amount of money in the system - as they try to counter the economic downturn. | Both the Bank of England and the US Federal Reserve have introduced quantitative easing - whereby they increase the amount of money in the system - as they try to counter the economic downturn. |
It was confirmed in November last year that the eurozone was officially in a recession. | It was confirmed in November last year that the eurozone was officially in a recession. |
The ECB has said that it expects GDP in the 16-nation bloc to shrink between 2.2% and 3.2% this year. | The ECB has said that it expects GDP in the 16-nation bloc to shrink between 2.2% and 3.2% this year. |
But the Organisation for Economic Cooperation and Development (OECD) predicted this week that the eurozone economy would contract by 4.1%. | But the Organisation for Economic Cooperation and Development (OECD) predicted this week that the eurozone economy would contract by 4.1%. |
The OECD also warned that the unemployment rate could rise to almost 12% in 2010. | The OECD also warned that the unemployment rate could rise to almost 12% in 2010. |