ECB Cuts Eurozone Rates And Boosts Stimulus

Written By Unknown on Kamis, 04 September 2014 | 20.18

The European Central Bank (ECB) has taken further action to boost bank lending and spur activity in the stagnating eurozone.

A series of rate cuts had an immediate impact with the value of the euro plunging against core currencies including the dollar and the pound - hitting its lowest level against the greenback since July 2013.

The ECB trimmed its benchmark interest rate to 0.05% from a previous record low of 0.15% and also raised its charge on banks to park money with it - the deposit rate doubling to -0.2% - in a bid to encourage banks to lend rather than hoard money.

Then, at his news conference 45 minutes later, ECB president Mario Draghi also confirmed the governing council had decided to start unconventional monetary policy though it stopped short of quantitative easing, despite pressure from some members for a more aggressive response.

He said the ECB would start purchasing asset-backed securities and covered bonds in October - a scheme he described as credit easing.

The moves are a response to a weakening of the eurozone's economic recovery - the most recent figures confirming zero growth across the euro area as a whole, with Germany's GDP actually contracting in the second quarter.

Analysts suggested the rate moves would make the ECB's upcoming four-year loan offer, or TLTRO, more attractive as banks can now get the funds for less.

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