European Central Bank Cuts Interest Rates to 2%

The European Central Bank cut interest rates half a percentage point to record lows Thursday to help a floundering euro zone economy and said there is room for further cuts if needed.

With inflationary pressures retreating markedly and growth prospects sluggish for this year, ECB President Wim Duisenberg said the economy faces downside risks.

“If the United States has even lower rates than we have, you can imagine we have not exhausted our room for maneuver,” Duisenberg said.

The ECB’s action, its third cut in six months, puts rates for the world’s second-largest economic region at 2%. But rates remain 0.75 percentage point above those set by the Federal Reserve, which has signaled a further reduction may be coming though U.S. growth is stronger.