China and the European Central Bank cut interest rates Thursday in an attempt to bolster their flagging economies amid worries the eurozone debt crisis will sap growth further in the coming months.
At the same time, the U.K. launched another round of stimulus to try to drag its ecnomy out of recession.
China's second rate cut in two months was unexpected. China's benchmark lending rates will be lowered by 31 basis points to 6 percent, and deposit rates will be cut by 25 basis points to 3 percent, the People's Bank of China said in a statement on its website.
The cuts are effective from Friday. The central bank last cut interest rates on June 7.
The Chinese central bank also took another step in liberalising interest rates by lowering the floor for lending rates to 70 percent of benchmark rates from 80 percent previously.
"The fact that China is actually cutting lending and deposit rates is a bigger deal than just reducing the reserve requirement," said David Morrison, market strategist at GFT Global. "But there's a great big Chinese data dump next week, so the question is whether this is a heads-up that the data will not be as good as hoped."
China is due to release data next week covering the second quarter and the month of June.
The quarter-point cut in the ECB's main refinancing rate to a record-low 0.75 percent was in line with market expectations and followed a dire batch of economic data that show even euro zone powerhouse Germany is entering a modest downturn.
In addition to cutting the main refinancing rate, the ECB also reduced its deposit rate, which acts as a floor for the money market, to zero from 0.25 percent.
This move could encourage banks to lend to each other rather than simply parking funds of up to 800 billion euros back at the ECB every night.
The interest rate cut is not seen as a panacea for the euro zone's problems, which stem from a loss of confidence in state and bank finances, but the reduction in borrowing costs shows the ECB is ready to support the flagging economy.
And the Bank of England launched a third round of monetary stimulus, announcing it would restart its printing presses and buy 50 billion pounds of asset purchases with newly created money to help boost the economy.
The move was widely expected after BoE Governor Mervyn King said last month the economic outlook had deteriorated since the BoE called a halt to its second round of asset purchases - also known as quantitative easing - in May.
"Against the background of continuing tight credit conditions and fiscal consolidation, the increased drag from the heightened tensions within the euro area meant that, without additional monetary stimulus, it was more likely than not that inflation would undershoot the target in the medium term," the BoE said in a statement.
Reuters contributed to this report.
"People are expecting that the ECB are going to cut rates today, but that could be cosmetic and not medicinal, says Gemma Godfrey, Brooks Macdonald Asset Management, providing insight on the likely outcome on interest rates when the European Central Ba...