ECB cuts rates to 1%

The European Central Bank (ECB) yesterday lowered interest rates by another 25 basis points to a record low of one per cent as it continues to respond to the economic crisis. However, yesterday's may be the last cut to be announced by the ECB for the time being as, in the view of its president Jean-Claude Trichet, the eurozone economy is showing faint, tentative signs of stabilising. Still, the world economy, including the euro area, is undergoing a severe downturn with the prospect of both external and domestic demand remaining very weak through 2009 before gradually recovering in the course of 2010, Mr Trichet told a news conference. He said inflation expectations remained firmly anchored and were consistent with keeping inflation in line with the bank's target of price growth at or just below two per cent. The European Commission this week forecast the eurozone's economy would shrink by four per cent this year. The ECB has cut rates consistently from the level 4.25 per cent that they were at last October. This is the third cut since March, when Malta's leading banks decided not to follow the ECB's lead, deeming interest rates to already be low enough. Since that decision, the ECB has cut rates by a full one per cent.