The European Central Bank (ECB) cut its key interest rates for the second time in three months today when it took a quarter of a percentage point off its central "refi" refinancing rate to 2.50 per cent from 2.75 per cent.
Financial markets had hoped for a half per cent cut to revive the flagging euro zone economy.
This rate cuts brings the cost of borrowing in the State to its lowest level in 50 years.
As growth in the 12-country euro zone slows, and a possible war in Iraq further undermines already low investor and business confidence, the bank's governing council decided at its regular policy-setting meeting to give the region's ailing economy a boost by easing monetary conditions in the single currency area.
ECB President Mr Wim Duisenberg said the "subdued pace of economic growth and the appreciation of the exchange rate of the euro" had opened up the room for a rate cut.
The ECB also lowered its other two key rates - the deposit rate and the marginal lending rate - by a quarter-point to 1.50 per cent and 3.50 per cent respectively.
The last time the ECB cut its key rates was by half a percentage point on December 5th.
The latest move had been largely expected following a whole series of comments by top ECB officials in recent days that appeared to pave the way for a further reduction in borrowing costs, although many observers had been banking on a bigger reduction of half a percentage point.
The euro eased following the decision and was changing hands at $1.0934 immediately afterwards, compared with around $1.0941 shortly beforehand.
AFP