ECB cut base rates 0.50 points

European Central Bank cuts rates to 2 percent
European Central Bank cuts interest rates by half percentage point to 2 percent

FRANKFURT, Germany (AP) -- The European Central Bank cut its interest rates by a half percentage point to 2 percent on Thursday, moving to protect the continent's economy against a deep recession amid increasingly grim economic data.
The decision to cut the main refinancing rate from 2.5 percent was in line with market expectations and left the rate at its lowest level since December 2005. It followed a three-quarter point cut last month.
"Despite some apparent earlier reluctance to cut interest rates significantly in January after reducing them by 175 basis points over the previous three months, the ECB really had little option but to act again given the clear, widespread evidence that the euro zone recession is deepening," IHS Global Insight economist Howard Archer said after Thursday's decision.
With euro zone inflation heading lower, "the ECB had ample scope to cut interest rates further," he argued.
The ECB has now reduced interest rates on four occasions since October from a high of 4.25 percent, though it has stopped short of the more aggressive cuts enacted by the U.S. Federal Reserve and the Bank of England.


ECB expected to cut base rates at least 0.50 points (Thursday January 15th)
Mr. Trichet (and the ECB) does not really want to cut base rates with more than 0.50 points, but with the rapidly deteriorating economic situation in the Euro Zone he faces an immense outside pressure.
Stock Markets are down for the year (2009) with more than 10 percent.
Bank crisis deepens as ECB rate cut expected

FRANKFURT/TOKYO (Reuters) – Bank of America and Citigroup faced fresh turmoil as investors questioned if they had the capital strength to cope with a global crisis that is set to push the European Central Bank to cut rates later on Thursday.
Data across the developed world pointing to a deepening recession and fears that more public money in the United States may be needed to keep banks afloat weighed on financial markets.
Asian equities followed European and U.S. markets to fall to multi-week lows. Tokyo's Nikkei average slipped close to 5 percent after news that Japan's core machinery orders fell at a record pace in November.
Shares in Bank of America and Citigroup, two of America's biggest banks, fell as they faced a fresh crisis of confidence over whether they have enough capital to cover hemorrhaging losses from toxic assets and the struggling global economy.
"The large banks in the U.S. are not lending, and they're desperate to conserve capital," said Dan Alpert at Westwood Capital in New York. "Banks only remain going concerns because the federal government is topping up their equity."

Rate cut BoE and ECB ( November 6)

LONDON – The European Central Bank and the Bank of England are both expected to cut interest rates Thursday as they face sharply lower growth prospects as a result of the world's financial turmoil.
There's even talk that the Bank of England may reduce interest rates by as much as a full percentage point for the first time since four cuts of that size in 1992-3 when Britain's economy was last mired in recession.
Most economists, however, expect both to follow the U.S. Federal Reserve's lead and cut by a half point, which would take their benchmark rates to 3.25 percent from 3.75 percent for the ECB and to 4.00 percent from 4.5 percent for the Bank of England.
Both central banks, which followed the Fed and other banks in a coordinated cut on Oct. 8, have been criticized in some quarters for being slow to respond the sharp economic slowdown this year given their prevailing fears about inflation. The European Central Bank actually raised rates a quarter point in July as inflation spiked sharply higher.