November 7, 2013
European Central Bank Makes a Surprise Rate Cut
By JACK EWING .
FRANKFURT — In an unexpectedly swift reaction to economic warning signals, the European Central Bank cut its benchmark interest rate to a record low on Thursday, moving to head off what some economists fear could be a long period of stagnation like the one that has afflicted Japan.
When prices fall, consumers and businesses delay purchases because they expect goods to become even cheaper. Corporate profits decline, and companies are forced to pay their workers less. A spiral begins that is difficult to brake.