6 Jul 2012

Central banks act to jolt stuttering economies

7:28 am on 6 July 2012

Central banks of China and Europe have cut interest rates, while the Bank of England on Thursday announced a further stimulus move to boost the UK economy.

Of the three, the surprise move was from the Bank of China which cut its benchmark interest rates for the second time in two months.

Benchmark lending rates will be cut from 6.31% to 6%, while deposit rates will fall from 3.25% to 3% , the BBC reports.

China's export growth has been hit by a fall in demand from two of its biggest markets, the US and Europe, still struggling with the global debt crisis.

China's economy grew at an annual rate of 8.1% in the first quarter, the slowest pace in almost three years.

The European Central Bank (ECB) has reduced its key interest rate from 1% to a record low of 0.75% amid recession in the 17-nation euro zone.

The ECB also reduced its deposit rate from 0.25% to zero in a move designed to stimulate lending between banks.

Bank president Mario Draghi said the euro zone was likely to show little or no growth in the second quarter of the year, but should recover somewhat by the end of the year.

The Bank of England has injected an extra £50 billion to help stimulate its weak economy, while leaving interest rates on hold.

Its quantitative easing (QE) programme aims to boost the economy by buying bonds. The latest increase will take the total stimulus to £375 billion.

The BBC reports the additional stimulus had been expected, following last month's Monetary Policy Committee meeting when four of the nine members voted to increase quantitative easing.