AKC News // ECB cuts rates by half a percentage point

The European Central Bank cut its main lending rate by 50 basis points today as the euro zone economy slows.

The move takes the ECB's key interest rate to 3.25% and is the second cut in just under a month following an emergency 50 basis points reduction made on October 8 in tandem with a host of other central banks.

The Bank of England earlier cut rates by 150 basis points and the Swiss National Bank by 50 basis points.

ECB President Jean-Claude Trichet will explain the Governing Council's decision at a news conference later this afternoon. He is expected to say the move is in response to falling economic growth and justified by the fact that inflation worries have eased sharply.

The euro zone's economy, which had grown every year since the bloc's creation in 1999, contracted by 0.2% in the second quarter this year. Most economists expect further shrinkage in third quarter GDP figures when they are released on November 14.

Annual inflation is now at 3.2%, well above the ECB's target of just under 2%, but economists expect it to drop rapidly in the coming months.
Three banks operating in the Irish market have said they will pass on the half a percentage ECB rate cut in full to their tracker and variable interest rate mortgage customers.

Ulster Bank and Bank of Scotland Ireland said the new rates will come into effect from December 1, while earlier AIB said it would pass on the rate cut in full.

Date : 06-11-2008