European Bank Reduces Interest Rate to 1.25%

The European Central Bank (ECB) reduced its key interest rate yesterday by a quarter percentage point to 1.25%, confounding the expectations of most analysts, who had anticipated a reduction of 0.5 percentage points, writes Reuters.

Also, ECB reduced the interest for deposits in one day with 0.25 percentage points to 0.25%. Since the last meeting of the ECB, the statistics confirmed that the euro zone economy probably continued to compress in early 2009, while inflation is about to drop significantly.

Most economists consulted by Reuters estimated that the refinancing interest will be down 0.5 percentage points, a smaller number of specialists stake on a down of 0.25 percentage points or maintain the current level of 1.5%.

ECB president, Jean-Claude Trichet, will hold a conference which will explain the reasons, why they have taken such decisions.