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Eurozone bank cuts interest rate

The European Central Bank has bowed to pressure and delivered a 0.25% interest rate cut.

The move comes following a fall in inflation in the eurozone to a three-year low while record unemployment had increased pressure on the ECB to deliver a cut in interest rates.

Annual inflation in the 17 countries that use the euro dipped to 1.2% in April. This was the lowest since February 2010 and compares with 1.7% a month earlier, according to the European Union's statistics office in Luxembourg.

The rate has been below the ECB's 2% ceiling since February. March's jobless rate in the eurozone rose to 12.1%, highest since the data series began in 1995.

The Frankfurt-based ECB sees inflation being subdued this year and next. A reduction in rates piles pressure on banks to resist another hike in variable rates. Experts said that is why AIB, EBS and Haven pre-empted the likely ECB rate cut by hiking variable rates from June by up to 0.4%.

ECB president Mario Draghi last month signalled that the ECB stood ready to cut interest rates, warning that the economic downturn had spread into parts of the eurozone previously spared.

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