ECB Cuts Interest Rates to 1%

The European Central Bank has slashed interest rates by 25 basis points to 1 percent, in line with estimates.A statement on the ECB website said that, “The interest rate on the main refinancing operations of the Eurosystem will be decreased by 25 basis points to 1.00%, starting from the operation to be settled on 14 December 2011.”In addition, “The interest rate on the marginal lending facility will be decreased by 25 basis points to 1.75%, with effect from 14 December 2011. The interest rate on the deposit facility will be decreased by 25 basis points to 0.25%, with effect from 14 December 2011. The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today [Thursday].”Interestingly enough, the Bank of England's rates remained unchanged at 0.5 percent. According to the New York Times, “The central bank kept its interest rate at 0.5 percent, where it has been since March 2009, and also left its bond purchasing target unchanged at £275 billion, or $430 billion. Some economists expect the Bank of England to expand its asset-buying program further next year to help avoid a credit crunch. ““Nobody is particularly optimistic at the moment,” Philip Rush, an economist at Nomura, said to the NY Times. “The full extent of the U.K. economic woes can't be pinned on the euro area alone but at least the recent markdown is directly attributed to it. The U.K. is geographically but not economically detached from the European mainland.” Following the news, Dow futures in pre-market trading moved lower amidst rumors that the rate cut would, in fact, be bigger.