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Image: LUCA BRUNO/AP/Press Association Images

Surprise! ECB cuts interest rate to 1.25 per cent

On his first day in the job, ECB president Mario Draghi surprised everyone by cutting the eurozone’s main interest rate.
Nov 3rd 2011, 1:21 PM 1,057 34

THE NEW EUROPEAN Central Bank (ECB) president Mario Draghi has marked his first meeting of the policy-making governing council by deciding to cut the main interest rate by a quarter point to 1.25 per cent.

The move has surprised markets which were expecting the ECB to hold rates steady at 1.5 per cent. Former president Jean-Claude Trichet already increased the rate twice this year.

The move is seen as a measure to calm markets which have been in turmoil over the uncertainty created by the situation in Greece.

Currently eurozone inflation stands at 3 per cent which is well above the ECB’s target of close to below 2 per cent, BBC News reports.

The change will come into effect from next Wednesday.

RTÉ’s economics correspondent Seán Whelan reports that the cut could offer a €11 and €15 per €1,000 reduction on a 25-year tracker mortgage.

Speaking on RTÉ’s News at One, the Minister for Finance Michael Noonan welcomed the cut, and advocated a further slashing of interest rates by as much as 0.5 per cent in the coming months.

Read: What challenges face the new ECB chief?

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Hugh O'Connell

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