Hard on the heels of the Bank of England’s one percentage point interest rate cut to a twenty-seven year low, the European Central Bank – responding to official statistics confirming a eurozone-wide recession – has similarly delivered a record reduction for the 15 countries that use the euro from 3.25% to 2.5%.

Commenting on the British rate cutting measure, which has been welcomed by many commentators in the hope it would reinvigorate the slowing economy, Ian McCafferty, (PICTURED), Chief Economist at the CBI, said: "What is critical for business and consumers alike is that this reduction is passed on. The economy is stalling, inflation is expected to undershoot the Bank's own target and the headline rate of inflation is likely to turn negative for at least a few months in 2009. We need to see lending improve and to keep business working.”

With increasingly dismal economic data and mounting worries over the potential for deflation stalking the markets, economists expected bold steps by Europe's central bankers and others to follow the BoE and deliver big rate cuts. However, what was not predicted was the size of the adjustment, not least in view of the  rate-setting Governing Council’s hitherto more measured approach, such as last month, cutting its key rate by just a half point to 3.25%., prompting many observers to charge it with having fallen behind the curve. "While the BoE seems ready for another bold rate cut, the ECB has emphasised the virtues of a measured response," said Marco Annunziata, chief global economist at UniCredit MIB. "I disagree, and believe the ECB should cut rates substantially…"