ECB cuts eurozone rate to 1.25%

by Richard Kilner

Story link: ECB cuts eurozone rate to 1.25%

The European Central Bank (ECB) has announced a cut in interest rates for the eurozone of just 25 basis points.

This reduction brings the rate to 1.25%, effective from the 8th of April.

Previously the ECB had cut rates by 50 basis points, and although the eurozone rate is very low it is nevertheless significantly higher than the UK’s interest rate of 0.5%, the lowest in the history of the Bank of England.

Unlike a conventional central bank which handles the monetary policy decisions for a single country the ECB is responsible for attempting, with each interest rate move, to do what is best for the broad range of nations that have adopted the European single currency.

Despite this the present rate of 1.25% is a full 300 basis points lower than the July 2008 level of 4.25%, and many analysts had predicted a reduction of 50, rather than 25 basis points.

With the UK rate almost zero and the ECB making smaller cuts, it may be that the European central banks are nearing the end of interest rate cuts.