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European Central Bank cuts interest rates

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The European Central Bank has cut interest rates by 25 basis points to 1.25 per cent in the first council meeting to be chaired by new president Mario Draghi.

The former Italian central bank governor took over as president this week and will give a press conference later today.

Ian Kernohan, economist at Royal London Asset Management, says: “Although the market was expecting a rate cut in December, it can’t have been a huge surprise that the European Central Bank cut rates today, given the very poor run of economic data in Europe.

“I don’t think this move has much to do with change at the top of the European Central Bank.”

He adds: “The economic backdrop has altered dramatically since the summer, and I suspect [former president] Trichet would have agreed to this move, if he was still president.”

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  • In complete contrast to the Eurozone, the IMF expects that Asia's growth will still remain robust with China experiencing 9 percent growth in 2012 and India experiencing 7.5 percent growth as shown here:

    The contrast between the economic growth of the world's developing nations and developed nations will make the balancing act for central bankers even more difficult in the coming year.

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