Friday, 8 November 2013

ECB cuts rates, US and Japanese economies accelerate

The European Central Bank cut its main refinancing rate by 25 basis points to a record low 0.25 percent on Thursday.

At a news conference following its latest monetary policy meeting, ECB President Mario Draghi said that weakening price pressures justified the rate decision. He warned that the euro area risks a “prolonged period” of low inflation and that borrowing costs will be kept low for an “extended period”.

In response to the rate cut, the euro fell by the most in almost two years against the US dollar and eurozone government bonds rose.

The ECB rate cut came as data on Thursday showed that the euro area's largest economy, Germany, saw industrial production fall 0.9 percent in September.

In contrast to the ECB, the Bank of England left its monetary policy unchanged on Thursday following strong economic data in recent months.

Economic data in the world's two largest developed economies on Thursday also suggested little need for additional monetary stimulus.

The US reported on Thursday that the economy grew at a 2.8 percent annualised rate in the third quarter, up from a 2.5 percent rate in the second. A faster rate of inventory accumulation in the third quarter offset slower consumer and business spending.

In Japan, the index of coincident indicators rose to 108.2 in September, the highest level since July 2008, from 107.6 in August. The index of leading indicators jumped to 109.5 from 106.8.

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