Eurozone cuts interest rates by 0.5% to fight off prolonged recession

| January 15, 2009 | 0 Comments

The European Central Bank (ECB) has today cut interest rates in the eurozone by 0.5% to 2%, as expected by analysts.

The reduction is the fourth time the ECB has cut rates in as many months as it endeavours to fight off a prolonged recession. Rates stood at 4.25% in September 2008.

Official figures show that the 16-member nation has been in recession since September 2008.

Today’s cut will now affect Slovakia, which became part of the eurozone on January 1.

However, the rate in the eurozone remains higher than that of other leading nations. Last week, the Bank of England cut interest rates to 1.5% - the lowest level since the Bank was established over 300 years ago.

In the US, the Federal Reserve lowered interest rates to between 0% and 0.25%, while interest rates in Canada are 1.5%.

Furthermore, Japanese and Swiss rates are also close to 0%. All economies are lowering rates to fight off recession.

Meanwhile, inflation in the eurozone fell to a 26-month low last month, as a result of the sharp fall in the price of energy bills.

Official figures from the European Union’s statistics office, Eurostat, said inflation in the eurozone was 1.6% year-on-year, down from 2.1% in November and below the ECB’s target of just under 2%.

In related news, a survey by research group Markit found that business activity across the eurozone was at its lowest level ever.

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