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Euro rates hit record low of 1.5% Euro rates hit record low of 1.5%
(30 minutes later)
The European Central Bank (ECB) has cut its key interest rate to 1.5% from 2.0%, the lowest since it started setting euro rates in January 1999.The European Central Bank (ECB) has cut its key interest rate to 1.5% from 2.0%, the lowest since it started setting euro rates in January 1999.
It followed a cut in UK rates by the Bank of England. US and Japanese rates are already effectively zero.It followed a cut in UK rates by the Bank of England. US and Japanese rates are already effectively zero.
A cut had been expected at the March meeting since ECB president Jean-Claude Trichet had described it as a key "rendezvous" for ECB rate-setters. At a news conference, ECB president Jean-Claude Trichet slashed his forecasts for eurozone growth.
Attention now turns to what other ways the ECB may try to boost the economy. The ECB is now predicting GDP this year in the 16-nation bloc will shrink by between 2.2% and 3.2%.
There is much interest in whether Mr Trichet will use his afternoon news conference to announce the introduction of any other stimulus measures. Its last prediction, made in December, was that growth would be between no change and a fall of 1% in 2009.
"The question is what else they can do?" said Stephanie Deo, an economist at UBS. For 2010 it was predicting growth of between 0.5% and 1.5%. It is now forecasting growth of between 0.7% and minus 0.7%.
"They could buy paper on the market, they could intervene more on the money markets and there is talk about clearing houses for certain assets." Slowing growth was confirmed by revised economic growth figures issued earlier on Thursday.
Slowing growth
Thursday's decision was the ECB's fifth rate cut since October 2008, which has brought eurozone rates down from 4.25%.
The challenge facing the ECB was confirmed by revised economic growth figures for the 16 nation bloc issued earlier on Thursday.
GDP for the last three months of 2008 was down 1.3% from the same quarter of the previous year, worse than the initial estimate of 1.2%.GDP for the last three months of 2008 was down 1.3% from the same quarter of the previous year, worse than the initial estimate of 1.2%.
The figure for the previous quarter was left unchanged at a 1.5% fall.The figure for the previous quarter was left unchanged at a 1.5% fall.
The ECB is expected to revise its growth forecast for this year at its news conference. Thursday's decision was the ECB's fifth rate cut since October 2008, which has brought eurozone rates down from 4.25%.
Its last prediction, made in December, was that growth would be between no change and a fall of 1% in 2009.
For 2010 it was predicting growth of between 0.5% and 1.5%.