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European Central Bank rate falls to 2%

The ECB (European Central Bank) has today revealed a reduction of 0.5% in European base rates down to a level of 2%. While this is a record low for the ECB rate there had been calls for a significantly larger cut to try and stimulate the Eurozone. Many believe this light touch move will put the ECB and EU at serious loggerheads with member governments who have seen their domestic economies collapse before their eyes.

It had been hoped that the ECB would look to reduce rates further in order to increase liquidity in the market and reduce the cost of finance. The talk over the last few weeks has been of a move towards 0% interest rates across Europe, and in many other parts of the world, but today's action indicates a totally different strategy.

Many domestic governments are puzzled as to why the ECB has not gone for a larger cut in rates at a time when each and every economic report regarding Europe is downbeat to say the least. This has created some uncertainty in the currency markets with speculation that the ECB will need to reduce rates further in the short term, something which could prey heavy on the mind of currency investors.

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