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The ECB announces Eurozone rate cut

In a move which is expected to at least place a floor under the European economy the ECB today announced a further reduction in Eurozone interest rates from 1.25% to 1%. This is the seventh time that rates have been cut in Europe and is a further reflection of concerns that the Eurozone economy is still very sluggish at best.

There are a number of analysts who expect this latest interest-rate reduction to be the last, unless the situation worsens substantially, with a probability that quantitative easing and other alternative economic policies will soon come into play. Despite hopes that the European economy would bounce back very quickly, a number of negative reports have materialised from the EU which give a very different picture. Caution is very much the watchword in the European Parliament at this moment in time and it will be very difficult to forecast when and how strong any recovery will be.

The need to get money flowing in the money markets is paramount, as we have seen in the UK and US, and the ECB is well aware of this. Interestingly, as UK base rates remained unchanged and European rates fell yet again, there are signs that Europe, the UK and the US may well have stopped working in tandem and are looking inwards towards their own economies.

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