Two European banks cut interest rates

London -- Central banks in Britain and Sweden cut their key interest rates to 2 percent Thursday to provide liquidity to financial markets.

The Bank of England cut its rate 1 percentage point to a lowest level since 1939, the Financial Times reported.

Sweden's central bank, Riksbank, slashed its rate by an unprecedented 175 basis points, following the country's 0.1 percent gross domestic product decline in the third and second quarters compared with the quarters that preceded them.

"A large reduction in the interest rate and the interest rate path is necessary to dampen the fall in production and employment and to attain the inflation target of 2 percent," Riksbank said in a statement.

In Britain, "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," said Ian McCafferty,
economic adviser to business lobby group CBI.

"The economy needs a significant monetary stimulus and the bank has clearly decided this will be best achieved by another big cut in interest rates," he said.

Copyright 2008 by United Press International.