European Central Bank cuts rates...

In a long-awaited move, the European Central Bank (ECB) finally cut its benchmark interest rate from 0.75% to 0.5%, having had the rate on hold for 10 months despite the worsening economic health of the eurozone member states.

The ECB eventually moved, as manufacturing output shrank in April across the 17-nation bloc, including Germany.

Unemployment also reached an all-time high, with inflation at a three-year low. Also, the Purchasing Managers’ Index (PMI) for the eurozone fell to 46.7 in April, against 46.8 in March. Even in Germany their PMI fell to 48.1 in April, from 49.

Chris Williamson, Chief Economist at Markit, which collates the PMI data, said: “There is nothing here to suggest that manufacturing will turn the corner and stabilise any time soon, putting greater onus on policymakers to act quickly to reinvigorate growth.”

However, market reaction to the ECB’s move was positive, with the euro strengthening against the US dollar for a time and hope building that the lower interest rates would reduce borrowing costs for the wider economy, thus boosting economic growth.

There have been fears that lower interest rates have not - to date - helped the weaker eurozone countries, such as Greece, Spain, Portugal, Italy and Ireland. Some of these countries, together with France, have called for a relaxation of the austerity measures already put in place, which they believe have stifled growth in their region.

Expressing a sentiment echoed by Italian Prime Minister Enrico Letta and French President Francois Hollande, the European Council President Herman Van Rumpuy called for a strategy that would promote growth and create jobs. He was quoted as saying: “Taking these measures is more urgent than anything. After three years of fire-fights, patience with austerity is wearing understandably thin.”

Issued by: Enable Independent Financial Life Planners
 25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE.