Salar posted on December 08, 2011 05:51
More good news for home owners with Europe as The European Central Bank has cut interest rates back to their historic low of 1%, as expected by markets. UK interest rates have been held at a record low of 0.5% by the Bank of England's Monetary Policy Committee.
With a lot of Concerns about the strength of the economic recovery and the eurozone debt crisis meant that economists had expected rates to remain unchanged or a little lower and today The quarter-point cut comes as crisis and recession threaten the eurozone.
The decision comes just ahead of a "do-or-die" Brussels summit of EU heads to hammer out a plan to save the euro. All eyes will now be on the ECB President, Mario Draghi, at a post-meeting press conference. The ECB is also thought to be preparing a bailout for the Italian government.
It is the second such rate cut since Mr Draghi took over the ECB presidency last month.
Recent economic data has made gloomy reading, with the influential NIESR think-tank estimating this week that growth slowed again in the three months to November to 0.3%, from 0.4% in the three months to October.
It followed warnings from Bank governor Sir Mervyn King that UK banks should brace themselves for a potential eurozone collapse amid fears of a second credit crunch.
Howard Archer, analyst at IHS Global Insight, said: "Holding back on more QE until early 2012 also gives the MPC more time to judge whether inflationary pressures are easing, which some committee members believe is important for the Bank of England's credibility before it goes further down the QE road."
The second cut has returned rates to the 1% level that prevailed from the summer of 2009 to the end of 2010, in response to the global financial crisis and recession.
"What we are seeing from the ECB is pretty much 'more of the same'," said Graham Neilson, chief investment strategist at hedge fund Cairn Capital.
"What we need to see is a dramatic and meaningful U-turn at the ECB," he adds, saying that without a commitment by the ECB to provide massive financial support to Italy and other struggling governments, the eurozone will break up.
"The central bank does not have a mandate to do what is necessary to get us off this path."