Homeowners and businesses alike in Cork will welcome the news that the world's monetary authorities have joined forces in announcing a co-ordinated 0.50 per cent reduction in official interest rates.

Yesterday (Wednesday, October 8), the European Central Bank (ECB) joined forces with the Bank of Canada, the Bank of England, the Federal Reserve, Sveriges Riksbank and the Swiss National Bank in announcing cuts in their rates in response to the extraordinary stresses across the global financial system in recent days and weeks.

The minimum bid rate on the main refinancing operations of the Eurosystem will be reduced by 50 basis points to 3.75 per cent , with effect from the main refinancing operation to be settled on October 15. The interest rate on the marginal lending facility will be reduced by 50 basis points to 4.75 per cent, with immediate effect and the interest rate on the deposit facility will be reduced by 50 basis points to 2.75 per cent , with immediate effect.

Economic commentators in Ireland have welcomed the move with Ulster Bank saying, "Decisive action such as this is exactly what is needed to help stem the slide in confidence globally in the operation of the financial and banking systems and the consequent risks to economic activity."

Meanwhile, ISME, the Irish Small & Medium Enterprises Association demanded that the full benefit be passed on immediately to their small business customers by the lending institutions.

A spokesperson for the group stated, "The decision by the ECB should, in theory, bring a modicum of relief to many small businesses that have bank borrowings in the form of term loans and overdrafts. However, the reduction in rates will only be effective if the lending institutions pass on the benefit in full to their customers instead of their usual foot-dragging, thereby further increasing the banks' profit margins."

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