The European Central Bank cut its interest rate today to its lowest standing in the banks history and stated that the bank will begin buying bonds to help promote more credit flowing in the eurozone. The ECB reduced its interest rate today by 25 basis points from 1.25 percent to 
1.00 percent as expected by market forecasts. The ECB action today follows the rate reduction by 25 basis points at its last meeting on April 2nd and a 50 basis point cut on March 5th. The ECB has now slashed a total of 325 basis points off the interest rate since October 2008.
Jean-Claude Trichet, the President of the ECB, commented in his press statement today that, “Reflecting the impact of the financial market turmoil, economic activity continued to weaken in the euro area in the course of the first quarter of 2009, in parallel with the ongoing downturn in the world economy. This weakening in the first quarter appears to have been significantly more pronounced than projected in March. More recently, there have been some tentative signs in survey data of a stabilisation, albeit at very low levels. Overall, economic activity is likely to be very weak for the remainder of this year, before gradually recovering in the course of 2010.”
Trichet also announced that the ECB had decided to buy euro-denominated covered bonds of approximately €60 billion in an effort to provide more liquidity to the economy. The details of the plan are to be announced at the Governing Council meeting on June 4th.
Meanwhile, the Bank of England announced the decision to hold its interest rate at its lowest standing in history at 0.50 percent as widely expected. The BOE had last reduced its interest rate by 50 basis points on March 5th and also cut its rate by the same amount in each of January and February. The bank also announced today the decision to expand its quantitative easing program by an additional 50 billion pounds to a total of 125 billion pounds.
The BOE statement on the rate cut commented on the current economic environment, “The world economy remains in deep recession. Output has continued to contract and international trade has fallen precipitously. The global banking and financial system remains fragile despite further significant intervention by the authorities. In the United Kingdom, GDP fell sharply in the first quarter of 2009. But surveys at home and abroad show promising signs that the pace of decline has begun to moderate.”
The next BOE meeting is scheduled for June 6th.
Australian employment rises unexpectedly in April.
The Australian Labour force increased unexpectedly in April according to a report by the Australian Bureau of Statistics today. Australian employment increased by a seasonally adjusted 27,300 workers in April after decreasing by a revised 37,200 in March.
April’s increase brings the total of employed workers to 10,771,600 while the number of unemployed workers decreased by 35,300 to a total of 614,600. Today’s jobs data surpassed market forecasts that were expecting employment to fall by approximately 25,000 workers for the month. The Australian unemployment rate fell by 0.3 percent to 5.4 percent in April. The rate decline also surpassed market forecasts that were expecting the unemployment rate to increase to 5.9 percent.
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