The European Central Bank today joined the US Federal Reserve with a surprise half a percentage interest rate cut to boost confidence following last week's attacks on U.S. cities.
The bank said its key minimum bid rate was lowered to 3.75 per cent from 4.25 per cent. The Fed had earlier in the day lowered its key lending rate also by 50 basis points to three per cent. In the view of the Governing Council, the recent events in the US are likely to weigh adversely on confidence in the euro area, reducing short-term outlook for domestic growth, the bank said in a statement following an ad hoc meeting of its governing council carried out via a telephone conference.
The cuts follows a statement earlier this afternoon from European Central Bank President Mr Wim Duisenberg who said the US Federal Reserve's decision to cut its fed funds target rate by 50 basis points was not a "warning sign" for the European economy.
Speaking at a press conference arranged by the Bank of Finland, Mr Duisenberg said: "I can't see that [the US rate cut] as a warning sign for the European economy, but as a consequence of what happened last week to ensure confidence by central Open Markets Committee's consumers and investors."
The policy-making US Federal Open Market Committee (FOMC) had earlier cut the benchmark federal funds rate target by half a percentage point to 3.0 per cent, the eighth cut in rates this year.
AFP