Drastic bank rate cuts across Europe

The European Central Bank (ECB) slashed key rates by 75 basis points, reportedly the biggest ever cut in its 10-year history. With this reduction, interest rates for 15 countries of euro zone has come down to 2.5 percent from 3.25 percent.

Further, the ECB has also slashed the interest rate on the marginal lending facility by 75 basis points to three percent, with effect from December 10 and rates on the deposit facility would be decreased by 75 basis points to two percent.

On its part, Britain's central bank Bank of England cut the official bank rate paid on commercial bank reserves by 100 basis points to two percent.

"Despite the actions taken to raise bank capital, ease funding and improve liquidity, conditions in money and credit markets remain extremely difficult. The committee noted that it was unlikely that a normal volume of lending would be restored without further measures," a statement by the apex bank said.

The BOE committee determined that a further reduction in bank rate of 100 basis points to two percent was necessary in order to meet the target in the medium term, it added.

Sweden's central bank Riksbank also sliced its key short-term interest rate --repo rate, by as much as 1.75 percentage points to two percent.

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