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ECB cuts interest rates to 1% ahead of EU summit

Latest cut the second in as many months as ECB reduces cost of borrowing under president Mario Draghi

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The European Central Bank has cut its main interest rate by 0.25% ahead of the EU summit to 1% as the euro zone's worsening debt crisis outweighed the concern over persistently high inflation.

The ECB also reduced the interest rate on its deposit facility to 0.25% and the rate on the marginal lending facility to 1.75%, bringing all rates to match record lows reached in 2009.

The cut was the second in as many months, and means that the ECB has reduced borrowing costs in both meetings since ECB president Mario Draghi took over the central bank from Jean-Claude Trichet.

Markets are now looking for hints whether the ECB is preparing to cut rates even further in the coming months.

Attention will also focus on other changes in the central bank's policy, especially whether the cut is part of its move to more growth-oriented monetary policy instead of concentrating on keeping inflation low.

Central bank watchers are also keen to hear any news on whether the ECB is going to increase its government bond buys.


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