Thursday, November 7, 2013

ECB cuts refinancing rate 25 bps to 0.25%

    The European Central Bank (ECB) cut its benchmark refinancing rate by 25 basis points to 0.25 percent, a move that was not widely expected.
    The ECB, which last cut its rate in May, also cut the rate on its marginal lending facility by 25 points to 0.75 percent while the rate on its deposit facility would remain at 0.0 percent. It has now cut its policy rate by 50 basis points this year, up from 25 points in 2012.
    The ECB said in its statement that further details would be released at a news conference later today.
    Inflation in the euro zone fell to 0.7 percent in October from 1.1 percent in September, further below the ECB's target of inflation that is below, but close to 2.0 percent.
    The euro zone's economy has been strengthening recently, confirming the ECB's view that the economy is expected to recover at a slow pace as domestic demand gradually improves.
    But earlier this week the European Commission cut its 2014 growth forecast to 1.1 percent from a previous 1.2 percent and forecast that unemployment would be 12.2 percent, up from 12.1 percent forecast six months ago.
    In September the unemployment rate rose to 12.2 percent from 12.0 percent.

    The Commission, the European Union's executive arm, also forecast a contraction of the euro zone by 0.4 percent this year, the second year after shrinkage after 2012's fall in Gross Domestic Product of 0.7 percent.
    The euro zone's GDP expanded by 0.3 percent in the second quarter from the first, but compared with the second quarter of last year, GDP fell by 0.5 percent, the sixth quarter of decline.



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