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Eurozone interest rates cut to 1% Eurozone interest rates cut to 1%
(40 minutes later)
The European Central Bank (ECB) has cut interest rates in the eurozone to a record low of 1%, down from 1.25%.The European Central Bank (ECB) has cut interest rates in the eurozone to a record low of 1%, down from 1.25%.
It is the seventh time the ECB has lowered its key rate since October 2008, when it stood at 4.25%, as it tries to boost the eurozone economy. The central bank also agreed to take alternative measures to boost growth in the 16 countries that use the euro.
Analysts do not expect the cost of borrowing to go much lower in the 16 countries that use the euro. It is the seventh time the ECB has lowered its key rate since October 2008, when it stood at 4.25%.
However, the ECB may resort to using alternative measures to revive economic growth in the eurozone. The ECB said it is willing to follow its US and UK counterparts into directly buying up debt to get money flowing in the economy.
ECB president Jean-Claude Trichet will hold a news conference later, where he is expected to detail any new steps the bank may take. This policy is commonly known as quantitative easing.
"The rate decision was no surprise, but it is all about the language that will go with it," said Royal Bank of Scotland economist Jacques Cailloux. ECB president Jean-Claude Trichet said the ECB had decided in principle to buy euro-denominated bonds.
"The question is whether they will provide indication if the door remains open for further cuts or whether they close the door entirely." Mr Trichet said more details would be given when the central bank next meets on 4 June.
He also said that the ECB would provide banks with longer-term refinancing and did not rule out lowering rates further.
The ECB's decision followed the Bank of England's announcement that it would keep interest rates unchanged at 0.5% and pump an extra £50bn ($75.5bn; 56.5bn euros) into the UK economy by buying government and corporate debt.The ECB's decision followed the Bank of England's announcement that it would keep interest rates unchanged at 0.5% and pump an extra £50bn ($75.5bn; 56.5bn euros) into the UK economy by buying government and corporate debt.
Central banks around the world are using more unconventional monetary policy methods to support their economies, with interest rates at record low levels.Central banks around the world are using more unconventional monetary policy methods to support their economies, with interest rates at record low levels.
It is not clear whether the ECB is willing to follow its US and UK counterparts into directly buying up assets to get money flowing in the economy.