Business | Banking
ECB cuts interest rates by half point
The European central (ECB) bank cut its benchmark interest rate by 50 basis points on Thursday, its fourth successive reduction, but indicated it would pause for breath in February.
- Reuters
- Published: 23:51 January 15, 2009
Frankfurt: The European central (ECB) bank cut its benchmark interest rate by 50 basis points on Thursday, its fourth successive reduction, but indicated it would pause for breath in February.
The central bank cut to 2.0 per cent, to match its lowest ever rate, in line with what markets and most analysts had been expecting.
President Jean-Claude Trichet told a news conference the recent flurry of rate cuts was not necessarily over, saying two per cent was no floor for ECB rates and inflation risks would continue to diminish as the recession spreads.
But noting that February's policy meeting was only three weeks away, he said, "Our next important rendezvous for monetary policy will be our March meeting, where we will have substantial elements of new information."
Trichet said the euro zone economy was looking weaker than the ECB thought just a month ago.
Economic data and surveys since the ECB's last meeting pointed to a "further weakening of economic activity around the turn of the year, indicating the materialisation of previously identified downside risks to activity," he said.
The majority of economists in a Reuters poll expected the ECB to take another 50 basis points from borrowing costs, although the uncertainty was high.
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