Euro zone interest rates cut from 3.25% to 2.5%

| December 4, 2008 | 0 Comments

Policymakers in Brussels cut interest rates today for the 15-member euro zone.

The European Central Bank lowered interest rates by 0.75% to 2.5% and followed the announcement that the Bank of England had reduced rates from 3% to 2%.

Furthermore, Stockholm-based Riksbank, slashed interest rates by 1.75% to 2% in Sweden - the largest reduction for over 15 years, while The Reserve Bank of New Zealand reduced the cost of borrowing by 150 basis points to 5%.

It was the third time in as many months that interest rates had been lowered in the euro zone, as the central bank attempts to boost the economy. However, today’s cut was the most aggressive in a decade.

The cut was widely expected by analysts as official figures confirmed recently that the euro zone is in its first recession.

Further cuts are expected in the future since the recession in the euro zone seems to deteriorate by the day, according to Carsten Brzeski at ING Financial Markets.

Last week, figures published by the EU’s statistics office revealed that unemployment in the euro zone has risen to 7.7%.

Meanwhile, figures also from the EU’s statistics office have revealed that inflation in the euro zone has fallen to 2.1% in November, from October’s annual rate of 3.2%.

The member states of the euro zone are France, Italy, Germany, Belgium, the Irish Republic, the Netherlands, Luxembourg, Spain, Portugal, Slovenia, Malta, Greece, Austria, Finland and Cyprus.

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