EU cuts rates to lowest-ever level

European Central bank cuts interest rates by half-a-point to two per cent.

    The European Central Bank's move followed a three-quarter point cut last month [AFP]

    Jean-Claude Trichet, the European Central Bank president, said the ECB would wait until at least March before deciding on any further changes.

    Despite reducing interest rates from 4.25 per cent, the ECB has stopped short of the more aggressive measures adopted by the US Federal Reserve and the Bank of England.

    The Federal Reserve last month cut its rate to between zero and 0.25 per cent and the Bank of England lowered its rate to 1.5 per cent last week.

    'Deflation dangers'

    Inflation in the euro zone has fallen rapidly in recent months, reaching 1.6 per cent in December.
       
    Some economists are now warning of the dangers of deflation, as falling prices could worry consumers and force them to cut their spending even further.

    The euro zone economy was declared officially in recession in October, having fallen 0.2 per cent in the second part of 2008.

    Germany and Italy both slipped into recession in the third quarter.

    However, France managed to move against the trend, posting a 0.1 per cent increase in the same period following a 0.3 drop in the second quarter.

    SOURCE: Agencies


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