European Central Bank cuts interest rates

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.”