ECB Lowers Rate to 1%; BoE on Hold

123jump.com Staff
07 May, 2009
New York City

The ECB lowered its key lending rate to 1% and the Bank of England left its key rate unchanged at 0.5%. The central banks are now focused on providing additional liquidity through direct lending and purchasing government debts.

[R]8:30AM New York – The ECB lowered its key lending rate to 1% and the Bank of England left its key rate unchanged at 0.5%. The central banks are now focused on providing additional liquidity through direct lending and purchasing government debts.[/R]

The European Central Bank lowered its key rate by 0.25% to 1% and the Bank of England left its key rate unchanged to 0.5%.

The central banks around the world have been lowering rate as economies shrink, unemployment rises and investors confidence declines.

The latest rate cut from the ECB signals the banks willingness to accommodate the needs of the bond market and provide additional stimulus to sustain lending. However, the ECB will have to look for other measures to sustain the economy further.

The IMF has projected the sharpest economic decline among the wealthiest nations in Europe. The economy of the union is expected shrink at 4.2% followed by declines in the UK of 4.1% and in U.S. of 2.8%.

The Bank of England left its key lending rate to the three decade low and will continue its program of buying government debt.

European nations and UK are battling falling prices and declining demand and central bankers are focused on risks of deflation and not inflation at this time. However, record low rates will contribute to the inflationary forces if they remain low longer than they should.

Euro in currency markets was nearly unchanged against the U.S. dollar.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 408.33 or 4.55% to 9,385.70, Hang Seng index in Hong Kong increased 383.32 or 2.28% closed to 17,217.89, CSI 300 index in China higher 2.10 or 0.08% closed to 2,767.08. ASX 200 index in Australia increased 71.60 or 1.85% closed to 3,938.70. The KL Composite index in Malaysia lower 0.49 or 0.05% closed to 1,023.47.

The Kospi Index in South Korea increased 7.63 or 0.55% to close at 1,401.08. SET index in Thailand closed higher 4.57 or 0.87% to 527.72 and JSE Index in Indonesia increased 30.52 or 1.70% closed to 1,828.85. The Sensex index in India increased 164.19 or 1.37% closed to 12,116.94.

Europe Markets Review

In London FTSE 100 Index traded higher 114.63 or 2.61% to 4,511.12, in Paris CAC 40 Index increased 63.30 or 1.93% to 3,346.81 and in Frankfurt DAX index traded higher 88.72 or 1.82% to 4,969.43. In Zurich trading SMI increased 82.17 or 1.54% to 5,401.43.