ECB cuts rates by half a point to 2.75 per cent

The European Central Bank (ECB) has cut interest rates by a half of 1 per cent to 2.75 per cent for the first time in over a year at its monthly meeting in Frankfurt today.

In a move which had been widely anticipated, the bank cut its key refinancing rate, from 3.25 per cent to 2.75 per cent.

The rate could will be welcomed by markets as a bold, decisive move that could boost the euro zone's flagging economic growth.

The cut was well-signalled by ECB officials, with the bank's president, Mr Wim Duisenberg, saying on Tuesdaythe inflation outlook had improved while the region's economic recovery appeared fragile and uncertain.

It is the first time in 13 months that the ECB has cut its rate. This contrasts with the US Federal Reserve which has cut the cost of borrowing 12 times over the past 14 months to a 41-year low of 1.25 per cent.

A half point cut by lenders would reduce an average €27 off monthly payments on a €100,000 mortgage set over 20 years.

The Bank of England, which kept its rate at 4 per cent today, the lowest since 1964, also trimmed borrowing costs seven times last year.