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European Central Bank Cuts Key Interest Rate in Half

The European Central Bank has cut its benchmark interest rate in half in a new attempt to spur economic growth across the 17-nation euro currency bloc.

The central bank trimmed the rate Thursday from one-half of a percent to a quarter percent, a record low for the eurozone.

The bank's 23-member governing council in Frankfurt acted after a recent inflation report suggested the eurozone recovery from an 18-month recession remains weak. The report pegged inflation in the region at seven-tenths of a percent in October, well below the bank's target of just under 2 percent.

Bank president Mario Draghi said the eurozone economy is barely advancing, but conditions are slowly improving.

"Looking ahead, output is expected to continue to recover at a slow pace, in particular owing to a gradual improvement in domestic demand, supported by the accommodative monetary policy stance. Euro economic activity should, in addition, benefit from a gradual strengthening of demand for exports."

The cut in the refinancing rate makes its cheaper for European banks to borrow money from the central bank. The hope is that commercial banks will in turn offer lower lending rates to businesses, which can then use the borrowed money to expand their operations and hire more workers.

Draghi said the eurozone "may experience a prolonged period of low inflation," making it more difficult to boost the eurozone economy and cut record unemployment.

The eurozone jobless rate was pegged at 12.2 percent in September, with more than 19 million workers unemployed.

Draghi said the central bank would continue its effort to provide as much money as necessary for European banks at least until mid-2015.

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