ECB lowers key interest rates

Added by on December 8, 2011

The European Central Bank lowered its key interest rates by 25 basis points on Thursday, following a similar decrease in its key rates on November 3, citing financial market tensions, high uncertainty, andsubstantial downside risks.

In a statement President of the ECB, Mario Draghi, said inflation in the eurozone is likely to remain at over 2% and is expected to decline below 2% within several months. The ECB said that GDP grew 0.2% quarter on quarter in the third quarter with evidence of slower economic activity in the fourth quarter.

Projections for the GDP range between 1.5% and 1.7% for 2011, between -0.4% and 1% in 2012, and between 0.3% and 2.3% in 2013 – the ECB noted their projections for 2011 are narrower than previously reported and said they expect a significant downward revision for 2012 as a result of weaker confidence, worsening economic conditions, and expectations of lower foreign demand.

Highlighting the downside risks, the statement said, “… substantial downside risks to the economic outlook for the euro area exist in an environment of high uncertainty. Downside risks notably relate to a further intensification of the tensions in euro area financial markets and their potential spillover to the euro area real economy. Downside risks also relate to the global economy, which may be weaker than expected, as well as to protectionist pressures and the possibility of a disorderly correction of global imbalances”.

European Union leaders gathered in Brussels to discuss possible moves toward closer fiscal unions.