Central banks in Europe and Asia attempted to stimulate the sluggish global economy by loosening monetary policy and cutting interest rates.
The People’s Bank of China surprised investors by lowering its main one-year lending rate by 0.31 percentage points to 6 per cent, showing that the economic slowdown extends beyond Europe. As expected, the European Central Bank cut its main interest rate by a quarter point to 0.75 per cent, the lowest on record, and the Bank of England restarted money-printing and pumped an extra £50 billion into the UK economy, taking the total to £375 billon.
In Frankfurt, Mario Draghi, president of the ECB, said the rate cuts were taken independently by central banks and those in the eurozone reflected weak growth, “with heightened uncertainty weighing on confidence and sentiment”.
Insisting the rate cut was unanimous among all 17 eurozone members, the ECB also cut its deposit rate, the rate paid to banks parking money overnight at the central bank, to zero. The move will provide banks with a large deposit base a greater incentive to lend to other eurozone banks overnight. The burst of activity from central banks is intended to spark new life into the global economy, but few economists are confident it is possible quickly to halt the slowdown, which has gathered pace as the early 2012 eurozone euphoria faded.
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