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| ECB cuts eurozone interest rate to new record low of 0.5% | ECB cuts eurozone interest rate to new record low of 0.5% |
| (35 minutes later) | |
| The European Central Bank (ECB) has cut its benchmark interest rate to a new record low amid ongoing worries about the eurozone's economic health. | The European Central Bank (ECB) has cut its benchmark interest rate to a new record low amid ongoing worries about the eurozone's economic health. |
| The widely-expected cut to 0.50% from 0.75% is the first in 10 months. | The widely-expected cut to 0.50% from 0.75% is the first in 10 months. |
| Worries about eurozone economies were underlined on Thursday with data showing manufacturing activity across the 17-nation bloc shrank in April. | Worries about eurozone economies were underlined on Thursday with data showing manufacturing activity across the 17-nation bloc shrank in April. |
| In Germany, the eurozone's biggest economy, manufacturing contracted for the second month running. | In Germany, the eurozone's biggest economy, manufacturing contracted for the second month running. |
| Austerity debate | Austerity debate |
| Official data released on Tuesday showed record high unemployment in the eurozone, and inflation at a three-year low. | Official data released on Tuesday showed record high unemployment in the eurozone, and inflation at a three-year low. |
| Well ahead of the ECB's announcement, many economists were forecasting that lower interest rates were likely, but said the fresh data released this week made the case for a cut even stronger. | Well ahead of the ECB's announcement, many economists were forecasting that lower interest rates were likely, but said the fresh data released this week made the case for a cut even stronger. |
| ECB president Mario Draghi is due to hold a news conference later when he will expand on the reasons behind the rate decision. | ECB president Mario Draghi is due to hold a news conference later when he will expand on the reasons behind the rate decision. |
| There are concerns that the ECB's low interest rates are not feeding through to those economies most in need of a boost, with potential lenders still worried about the economic health of countries such as Greece and Spain. | There are concerns that the ECB's low interest rates are not feeding through to those economies most in need of a boost, with potential lenders still worried about the economic health of countries such as Greece and Spain. |
| In recent months there have been growing calls for European countries to move away from austerity measures, which critics say are stifling growth. Instead there are calls for a greater focus on stimulus measures. | In recent months there have been growing calls for European countries to move away from austerity measures, which critics say are stifling growth. Instead there are calls for a greater focus on stimulus measures. |
| Both French President Francois Hollande and newly-elected Italian Prime Minister Enrico Letta have urged a reconsideration of austerity policies. | Both French President Francois Hollande and newly-elected Italian Prime Minister Enrico Letta have urged a reconsideration of austerity policies. |
| On Thursday, European Council President Herman Van Rompuy said governments must take immediate action to promote growth and the creation of jobs because patience with austerity measures is wearing thin in some countries. | On Thursday, European Council President Herman Van Rompuy said governments must take immediate action to promote growth and the creation of jobs because patience with austerity measures is wearing thin in some countries. |
| "Taking these measures is more urgent than anything," he told a conference in Portugal. "After three years of firefights, patience with austerity is wearing understandably thin." | "Taking these measures is more urgent than anything," he told a conference in Portugal. "After three years of firefights, patience with austerity is wearing understandably thin." |
| A cut in interest rates lowers the costs for troubled banks that have taken emergency loans from the ECB, and could help them repair their finances so they can improve lending. But analysts were divided over whether the cut would have much of an impact. | |
| Howard Archer, analyst at IHS Global Insight, said: "Admittedly, it is unlikely that the trimming of interest rates from 0.75% to 0.5% will have a major growth impact, especially given fragmented credit markets, but any potential help to the eurozone economy in its current state is worthwhile." | |
| But Rick Meckler, president of hedge fund Liberty View Capital Management said the rate cut was "an assertive move by the ECB to jump start recovery in the eurozone". | |
| Shrinking | Shrinking |
| Thursday's Purchasing Managers' Index (PMI) highlighted the problems facing many eurozone countries. The index for Germany's manufacturing sector, which accounts for around a fifth of the economy, fell to 48.1 in April from 49 in March. A reading below 50 indicates contraction. | Thursday's Purchasing Managers' Index (PMI) highlighted the problems facing many eurozone countries. The index for Germany's manufacturing sector, which accounts for around a fifth of the economy, fell to 48.1 in April from 49 in March. A reading below 50 indicates contraction. |
| And in France, Italy and Spain, the eurozone's next three biggest economies, the PMI data also revealed contractions in manufacturing activity. | And in France, Italy and Spain, the eurozone's next three biggest economies, the PMI data also revealed contractions in manufacturing activity. |
| For the 17-nation eurozone bloc as a whole, the PMI index fell to 46.7 last month, from March's 46.8. | For the 17-nation eurozone bloc as a whole, the PMI index fell to 46.7 last month, from March's 46.8. |
| "There is nothing here to suggest that manufacturing will turn the corner and stabilise any time soon, putting greater onus on policymakers to act quickly to reinvigorate growth," said Chris Williamson, chief economist at Markit, which collates the PMI figures. | "There is nothing here to suggest that manufacturing will turn the corner and stabilise any time soon, putting greater onus on policymakers to act quickly to reinvigorate growth," said Chris Williamson, chief economist at Markit, which collates the PMI figures. |
| The euro fell to $1.3115 from around $1.3150 just before the ECB's decision. But it then recovered to hit a session high of $1.32105, taking it near a two-month peak of $1.3243 reached on Wednesday. | The euro fell to $1.3115 from around $1.3150 just before the ECB's decision. But it then recovered to hit a session high of $1.32105, taking it near a two-month peak of $1.3243 reached on Wednesday. |