ECB cuts interest rate

The European central bank today cut its main interest rate by 0.25% for only the second time this year.

The move followed pressure from industry to ease monetary policy to avert recession in European economies. The bank had previously stuck with its line that fighting inflation in the 12-nation euro zone was its first priority, easing rates only once while the US Federal Reserve cut rates seven times. But with inflation showing signs of easing, the bank's 18-member policy council decided to join central banks elsewhere in trying to boost European economies as the world economy shows signs of distress.

Analysts said a rate reduction had been on the cards after a fall in inflation - to 2.8% in July from 3% in June. The rate at which prices increase was expected to edge down further, even though it remains well above the ECB's 2% ceiling.

The US Federal Reserve, the Bank of England and the Bank of Japan have all cut rates in recent months. Of particular concern in Europe is the slowdown in Germany, Europe's most powerful economy, which is teetering on the brink of recession.

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