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France cuts key lending rate

PARIS: The Bank of France loosened its monetary grip a notch on Thursday by cutting one of its official interest rates again.

The central bank announced it was reducing its emergency five-to-10 day lending rate, which serves as a ceiling on money market lending, by half a point to 6.50 from 7.00 percent.

The Bank of France loosened its monetary grip on Thursday by cutting a key interest rate by more than many economists had expected.

The central bank reduced its emergency five-to-10 day lending rate, which serves as a ceiling on money-market lending, by half a percentage point to 6.5 percent from 7 percent.

Many economist had expected a cut of only a quarter point following three similar reductions in the past six weeks.

The new cut puts the ceiling almost back to the 6.4 percent level it was at until March when the central bank had to jack up rates to defend the franc during the presidential campaign. The franc has since recovered strongly, partly due to President Jacques Chirac's commitment to reduce the public budget deficit.

The Bank of France left its other key rate, the intervention rate, unchanged at 5 percent.

The ceiling rate cut, announced after a regular meeting of the Bank's monetary policy council, was the fourth since June 22 when Prime Minister Alain Juppe released his 1995 mini-budget, which stressed his determination to reduce France's deficit.

Financial markets welcomed the bigger-than-expected rate cut but the reaction was muted.-Reuter