Officials meeting in Frankfurt reduced the benchmark lending rate by half a percentage point to 1.5 percent. That’s the lowest since the ECB took control of monetary policy in 1999. The bank may wait until May to cut rates further, survey of economists shows.
The economy of the 16 euro nations is shrinking faster than the ECB expected just three months ago as the global slowdown curbs export demand and companies lay off workers. ECB President Jean-Claude Trichet has been reluctant to follow the Federal Reserve and the Bank of England, which have cut rates toward zero and started using other policy tools, for fear that will sow the seeds of future crises.
The euro-region economy shrank 1.5 percent last quarter and latest data suggest the recession is deepening. Manufacturing contracted at a record pace last month, confidence is at an all- time low, unemployment is climbing toward 10 percent and inflation, at 1.1 percent, is the weakest since 1999.