ECB cuts rate to 0.5 percent

The key refinancing rate had been cut from 0.75 percent to 0.5 percent, the European Central Bank (ECB) announced following a meeting of the rate-setting committee in Bratislava, Slovakia, on Thursday.

In addition, its marginal lending facility had also been reduced to 1 percent, the bank said, while the interest rate on deposits with the Central Bank remained unchanged at 0 percent.

The drop in the ECB's key interest rate - its first interest rate change in 10 months - had been widely expected after economic data for the 17-nation eurozone worsened recently.

Eurozone unemployment hit an all-time high in April, notably in member states on the bloc's southern periphery, which continued to languish in recession.

At the same time, inflation in April saw its biggest monthly drop in four years, to just 1.2 percent, thus bolstering the case for a rate cut to spur economic growth through cheaper lending.

While lower interest rates might boost lending in the crisis-hit eurozone's south, better-off countries in the north such as Germany, the Netherlands and Austria have been skeptical about its immediate effects.

German insurers and the country's dominant savings and cooperative banking sector said last week that a looser monetary policy at the ECB would have little economic impact and instead undermine people's savings.

uhe/ipj (Reuters, dpa, AFP)