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ECB cuts interest rate to 1%

THE European Central Bank cut its main interest rate by a quarter point to 1 percent yesterday and is poised to unveil more measures to help boost the 16-nation eurozone economy.

The ECB also cut its interest rate on its marginal lending facility - used to lend money to banks overnight - by half a point to 1.75 percent from 2.25 percent.

It was the fourth time this year that the Frankfurt-based central bank - which sets monetary policy for countries that share the euro - lowered rates, coming on top of cuts in January, March and April.

The ECB's last quarter point cut to 1.25 percent in April, however, left markets feeling let down, as a deeper reduction to help the economy back to growth had been expected.

Analysts were looking to ECB President Jean-Claude Trichet's news conference for more clues to the bank's outlook and what other steps it might take to support the financial system, such as possible asset purchases or lengthening the term for its credits to banks.

Elsewhere, the Bank of England left its benchmark rate unchanged at 0.5 percent but said it would increase its effort to expand the supply of money in the economy. Iceland's central bank cut official interest rates by 2.5 percentage points to 13 percent to help the country's collapsed economy yesterday, the third cut this year by the Sedlabanki.

The Czech Republic's central bank cuts its rate by a quarter percentage point to 1.5 percent, its lowest level since the country was formed after the split of the former Czechoslovakia in 1993. The anticipated move, announced yesterday, followed a half percentage point cut in February.

The export-oriented Czech economy has been hit hard as its major trading partners, including Europe's biggest economy, Germany, face a recession.

The United States Federal Reserve and the BOE have taken their benchmark interest rates nearly as low as they will go - the Fed funds rate is between zero and 0.25 percent.

Both the Fed and the BOE have also embarked on a policy of raising the money supply by buying securities from banks, known as quantitative easing.


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