The European Central Bank (ECB) has cut interest rates by a half of 1 per cent to 3.25 per cent following other major central banks in their efforts to stave off global recession.
The ECB was widely expected to cut its main interest rate for only the fourth time this year today amid mounting signs of a deepening economic slowdown.
The ECB, whose three cuts contrast with ten by the US Federal Reserve, has kept its main refinancing rate steady at 3.75 per cent since September 17th.
On that day, it made a half per cent cut in co-ordination with the Fed to shore up confidence after the September 11th terror attacks.
One reason behind the ECB's reluctance to cut rates is its stated emphasis on fighting inflation. Although rate cuts can spur growth by making it cheaper for businesses to borrow and spend, they also risk causing more inflation by increasing the supply of money.
Inflation in the euro zone has been creeping down, standing at 2.5 per cent in September. ECB president Mr Wim Duisenberg has said he expects it to hit the bank's goal of 2 per cent or less early next year.