CENTRAL banks around the globe upped the ante yesterday with a series of dramatic interest rate reductions to fight a deepening recession as fresh job cuts were announced by companies worldwide.

The European Central Bank cut its key interest rate by a record 0.75 percentage points to 2.5 per cent as the head of the European Central Bank head, Jean-Claude Trichet, said the euro zone economy could contract by as much as 1 per cent next year.

"On the basis of our current analysis and assessment we see global economic weakness and very sluggish domestic demand persisting in the next few quarters," Mr Trichet said.

The Bank of England cut its key interest rate by a full percentage point to 2 per cent amid mounting evidence Britain faces a deep recession. The move followed a record 1.5 per cent reduction last month.

Sweden earlier reduced its benchmark rate by 1.75 percentage points to 2 per cent - its sharpest cut since 1992 - and Denmark cut its rates by 0.75 percentage points to 4.25 per cent in line with the European move.

New Zealand's central bank cut the official interest rate by a record 1.5 percentage points to 5 per cent on Thursday.

"All of these are big positives for stabilising the current credit crisis," said Andrew Busch at BMO Capital Markets. "All of these are big positives for stabilising the global economy."

The moves came amid news of deep job cuts by global companies facing weak consumer and business spending.

US telecom giant AT&T said it was cutting 12,000 jobs, or 4 per cent of its workforce, beginning this month and through the end of next year, and slashing 2009 capital spending due to the economic downturn.

The job cuts stemmed from "economic pressures, a changing business mix and a more streamlined organisational structure", the company said.

Chemical giant DuPont said it was eliminating about 2500 jobs mainly in its businesses that support the vehicle and construction markets in the US and western Europe, citing "a sharp downturn in demand during the fourth quarter".

Job cuts were also announced by the media-entertainment group Viacom, which said a restructuring would reduce its workforce by 7 per cent, or 850 jobs.

Meanwhile, a US Labour Department weekly report revealed unemployment insurance claims were at a 26-year high, an ominous foreshadowing of its November non-farm payrolls and jobless report, due out last night.

"Overall, the claims data are pointing to the hardest landing, at least so far as employment is concerned, since the early 1980s," said T.J. Marta, an analyst at RBC Capital Markets.

"This report suggests that we are entering the period of the worst data we are likely to see for the downturn."

EU figures bore out an initial estimate that the euro zone is in its first recession, shrinking by 0.2 per cent in each of the last two quarters.

British house prices slumped by a record 14.9 per cent in the last three months and British car sales tumbled by a 28-year record of 36.8 per cent last month on a 12-month comparison as demand evaporated.

In Japan, business investment plunged at the fastest pace since 2002, sparking fears that Asia's largest economy, already in its first recession for seven years, contracted by more than previously thought in the third quarter.

In Beijing, China and the United States pledged on Thursday to co-operate in tackling the global economic crisis. "For the first time during [this series of meetings], the US and China will focus on how we can work together through international forums to strengthen the global economic system," the US Treasury Secretary, Henry Paulson, said.

Agence France-Presse