European Central Bank, Under New Chief, Cuts Key Rate

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Source: NYT

The European Central Bank lowered its benchmark interest rate Thursday, as the new president, Mario Draghi, acted quickly to address a looming recession and acute tension caused by the sovereign debt crisis.

Mr. Draghi, assuming office at one of the most dramatic points in the history of the euro zone, signaled with the decision that he may be more willing than his predecessor, Jean-Claude Trichet, to tolerate inflation in the name of growth and economic stability. The bank cut the benchmark rate to 1.25 percent from 1.5 percent.

Speaking to reporters after overseeing a meeting of the E.C.B. governing council for the first time, Mr. Draghi put the emphasis on risks to growth rather than prices. He warned that the bank was likely to make a “significant downward revision” in its forecast for euro zone growth and that data signals a mild recession.

“In such an environment, price, cost and wage pressures in the euro area should also be moderate,” he said. “Today’s decision takes this into account.”

Read more: http://www.nytimes.com/2011/11/04/business/global/european-central-bank-cuts-rates-hoping-to-avert-downturn.html