China announces its biggest rate cut in decade

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LONDON, Nov 26 (Reuters): Massive stimulus plans to drive the world out of recession took centre stage Wednesday with Europe considering a more than 130 billion euro boost and China announcing its biggest interest rate cut in a decade.
The moves came on the heels of an 800-billion-dollar credit market bailout from the US Federal Reserve.
Underlining the troubles facing industry from a deteriorating global economy, Toyota Motor Corp had its top-notch credit rating cut for the first time in a decade.
China's cut in banks' benchmark lending and deposit rates by 108 basis points came a day after the World Bank said Chinese growth next year would be around 7.5 per cent, the slowest rate since 1990.
The People's Bank of China (PBoC) also reduced reserve requirements by one percentage point for big banks and by two percentage points for smaller banks.
"It's certainly a lot more aggressive than anything they've done recently. I think it speaks volumes about just how much China has slowed down," said Anthony Muh of AT Asset Management in Hong Kong.
In Europe, French Economy Minister Christine Lagarde said an economic stimulus plan to be unveiled later in the day by the European Commission may amount to more than a previously expected 130 billion euros ($168.9 billion).
The Commission is set to urge the European Union's 27 countries to unite on a two-year dash for growth, even if it means breaking the region's national deficit targets.
Under draft proposals, the EU executive cites the scope for further interest rate cuts, and suggests a variety of possible stimulus policies ranging from tax cuts to increased social benefits.
"The measures have to be targetted so that after the two years, when we have got out of the crisis period, we can get back to the principles of managing public finances, controlling and reducing deficits, reducing public debt," Lagarde told French media.
European Central Bank (ECB) President Jean-Claude Trichet was quoted in Egypt's Al Ahram newspaper as saying that the ECB would do what it takes to provide liquidity to financial markets over the short term.
The moves in Europe follow Tuesday announcement by the US central bank, the Federal Reserve, of an 800-billion-dollar plan to buy mortgage-related debt and back consumer loans.
Under the life-support intervention, it is putting $600 billion toward mortgage-related debt and securities and $200 billion to support consumers.
Equity markets slipped Wednesday over worries about the impact of huge stimulus programmes on national accounts. Japan's Nikkei average shed 1.3 per cent and the index of top European shares was down 0.4 per cent.
Authorities across the world are struggling to keep their economies from sliding deep into recession and have already pumped billions into banks, money markets and now their broader economies as well as slashing interest rates.
The Organisation for Economic Cooperation and Development (OECD) forecast Tuesday that growth among its 30 member nations would contract by 0.4 per cent next year, with "negative growth" in 19 countries.
Chancellor Angela Merkel told Germany's parliament that the financial crisis would lead to a sharp economic slump.