“Europe’s Central Banks Slash Rates
Interest rates were slashed on a historic scale across Europe on Thursday as central banks reacted aggressively to the sudden and brutal deterioration in the economic outlook since the autumn.
The European Central Bank announced a three-quarters of a percentage point cut in its main policy interest rate to 2.5 per cent – its largest cut ever – just hours after Sweden’s central bank surprised markets by reducing the country’s official borrowing costs by a record 175 basis points. The Bank of England slashed its rates by another 1 percentage point to 2 per cent, equal to the lowest rate since the central bank was founded in 1694.
Even though none of the European central banks gave any encouragement to traders betting on further rate cuts, financial markets have already priced in another 0.5 percentage point reduction in the eurozone by February, and a fall to 1 per cent in the UK in the near future.
The action to boost Europe’s stalling economies was underpinned by a €26bn French stimulus plan to cushion the effects of the credit crisis.”
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