ECB cuts key interest rates and expands stimulus to lift inflation

ECB cuts key interest rates and expands stimulus to lift inflation


The European Central Bank has unleashed some
aggressive measures to prop up the eurozone economy.
It has cut all three of its interest rates… and expanded buying in the hope of coping
with ultra-low inflation. Park Jong-hong reports.
The stimulus measures were all-out and comprehensive. For the first time the European Central Bank
has paved the way for a zero interest rate era by cutting the key lending rate to zero
from point-zero-five percent. Also it pushed the deposit rate further into
negative territory to minus point-four percent a cut of 10 basis points and the lending facility
rate was cut to a quarter-of-a-percent from zero-point-three percent. “The Governing Council expects key interest
rates to remain at present or lower levels for an extended period of time and well past
the horizon of our net asset purchases.” The measures are hoped to boost the flagging
eurozone economy especially by helping to lift inflation in the eurozone.
Inflation has remained lower than the central bank target of two percent for three years
running. In addition to the rate cuts, the ECB added
it would expand its bond-buying stimulus program by raising monthly purchases to 80 billion
euros from the current 60 billion and that it will also include purchases of corporate
bonds. The host of measures, deemed more radical
than investors had expected, were the latest in the ECB’s quantitative easing program that
began a year ago. “For the decision of the ECB, it’s a surprise
for the entire market. It’s beyond expectation and that’s why the market goes up naturally.
But on the other hand, the people who are concerned about a possible exit and possible
bubbles which might develop are bigger and bigger and they rise.” As for the day’s trading, Europen markets
fell across the board after a brief rally during the day.
The FTSE 100 in London closed lower by nearly one-point-eight percent while the DAX in Germany
seemingly bore the brunt of the ECB’s initiatives plunging more than two-point-three percent.
Park Jong-hong, Arirang News.

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