3 European central banks slash rates
BoE and Swedish Riksbank cut bank rates to 2%, while ECB chops key lending rate to 2.50%.
NEW YORK (CNNMoney.com) -- Three European central banks slashed key interest rates Thursday in attempts to stem the recession.
The Bank of England cut its rate to 2% from 3%, which followed a reduction of 1.5 percentage points to 3% on Nov. 6. The Bank of England has never set its rate below 2%. It was last at 2% in 1951.
The European Central Bank, which governs monetary policy in 15 countries, cut its key lending rate by three-quarters of a point to 2.50%.
Both the Bank of England and the ECB were widely expected to lower interest rates.
In a written statement from the Bank of England, the central bank leaders said "downturn has gathered pace." The statement also said that the credit markets remain very tight and that it could be awhile before lending returns to normal.
"Despite the actions taken to raise bank capital, ease funding and improve liquidity, conditions in money and credit markets remain extremely difficult," said the Bank of England's monetary policy statement.
In a Web broadcast, European Central Bank President Jean-Claude Trichet said that inflation rates have moderated but that economic activity has continued to slow.
"The decline in inflation rates is due mainly to the fall in commodity prices and a significant slowdown in economic activity," said Trichet. He also said that global demand was expected to continue to weaken.
Trichet also said that the financial markets have been plagued by high levels of anxiety. "The level of uncertainty remains exceptionally high," he said. "Since September, there has been an intensification and broadening of the financial market turmoil," he added. "Tensions have increasingly spilled over from the financial sector into the real economy and the world economy as a whole is feeling their adverse effects."
The Swedish Riksbank also cut its key interest rate - or repo rate - by 1.75% to 2%.
In a statement from the Swedish central bank, the institution reported "there has been an unexpectedly rapid and clear deterioration in economic activity since October." The statement further indicated that it expects the economic weakness to continue.
The U.S. Federal Reserve has lowered its key lending rate nine times since September 2007 in an attempt to bolster the U.S. economy. At the end of October the Fed cut the key lending rate in the U.S. to 1%.