ECB cuts key lending rate to 1% from 1.25% (by William L. Watts)

FRANKFURT (MarketWatch) -- The European Central Bank on Thursday cut its key lending rate by a quarter of a percentage point to 1%. The widely-expected move follows a quarter-point cut in November, fully undoing rate hikes delivered earlier this year. ECB President Mario Draghi will host his monthly news conference at 8:30 a.m. Eastern.

BOE makes no changes to rates, bond-buying plan (by William L. Watts)

FRANKFURT (MarketWatch) -- The Bank of England on Thursday left its key lending rate unchanged at a record low 0.5% and maintained the size of its program of asset purchases, the centerpiece of its quantitative easing strategy, at 275 billion pounds ($430 billion). The outcome was widely expected. The BOE said the asset purchases, which were boosted by 75 billion pounds in October, would take another two months to complete. "The scale of the program will be kept under review," the bank said in a statement.

Draghi highlights importance of EU fiscal compact (by Polya Lesova)

LONDON (MarketWatch) -- European Central Bank President Mario Draghi said on Thursday that a "new fiscal compact ... is the most important precondition for restoring the normal functioning of financial markets" in Europe. He said this compact has three pillars -- first, national economic policies geared to fiscal stability, growth and job creation; second, fiscal rules at the European Union level; and third, a stabilization mechanism such as the euro zone's bailout fund.

Draghi: EU treaty prohibits monetary financing (by Polya Lesova)

LONDON (MarketWatch) -- At a news conference in Frankfurt, European Central Bank President Mario Draghi said on Thursday that the European Union treaty prohibits "monetary financing." He was responding to a reporter's question about why the central bank doesn't ramp up its bond-buying program. He also said that the ultimate decisions and political responsibility are in the hands of EU leaders, which will meet in Brussels on Thursday evening and Friday. Draghi also announced several non-standard measures that the ECB will take in order to improve access for the banking sector to liquidity and facilitate the functioning of euro-area money markets.

Euro-zone economy may contract in 2012, ECB says (by Polya Lesova)

LONDON (MarketWatch) -- European Central Bank President Mario Draghi said on Thursday that the bank's staff expect annual euro-zone real GDP growth in a range between 1.5% and 1.7% in 2011, and between 0.3% and 2.3% in 2013. For 2012, the ECB projections are in a range from a 0.4% drop to 1.0% growth. Compared with the September projections, "there is a narrowing of the range of the real GDP growth projection for 2011 and a significant downward revision of the range for 2012," Draghi said at a news conference. "These revisions mainly reflect the impact on domestic demand of weaker confidence and worsening financing conditions, stemming from the heightened uncertainty related to the sovereign debt crisis, as well as downward revisions of foreign demand."