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ECB cuts key rate, resumes buying bonds

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ECB cuts rate but won’t buy more bonds Description video: http://www.euronews.net/ The European Central Bank is pinning its hopes of keeping the euro zone economy out of recession with an interest rate cut and by offering more help to the […]

ECB cuts rate but won’t buy more bonds

Description video:
http://www.euronews.net/ The European Central Bank is pinning its hopes of keeping the euro zone economy out of recession with an interest rate cut and by offering more help to the region’s banks.\n\n \n\nBut it quashed hopes that it would aggressively boost its programme of government bond buying and allow euro zone central banks to lend money to the IMF so it can help fight the debt crisis.

ECB cuts key rate, resumes buying bonds

The European Central Bank (ECB) on Thursday announced a massive new bond buying program in an attempt to stimulate the eurozone economy.

President Mario Draghi announced that the ECB will cut its key deposit rate by 10 basis points to -0.5%, in line with expectations. The ECB currently expects interest rates to remain at or below their current level until it becomes clear that the inflation forecast «is steadily approaching a level close enough but below 2% within its forecast horizon, and such convergence remains».

The ECB also improved conditions on its long-term loans to banks and introduced a tiered deposit rate to help the banking system.

«The Governing Council expects (the bond purchase) to last as long as it takes to amplify the trade-off impact of its interest rates, and to end shortly before the ECB starts raising key interest rates», – said in a statement by the ECB. The central bank’s quantitative easing program implies spending € 20 billion a month to buy assets, if necessary.

Economists surveyed by Reuters expected a 10 basis point cut in the deposit rate, a tiered deposit rate to support banks, a € 30bn monthly bond purchase since October, and a renewed promise to keep rates low for longer..

ECB cuts key rate, resumes buying bonds

Overall, markets have been anticipating some form of stimulus, although in recent weeks the hawks in the ECB’s governing board have taken steps to downplay the scope of the upcoming measures..

The slowdown in the eurozone economy, persisting low inflation and the trade war between the US and China indicate that the European regulator is forced to introduce stimulus programs.

Recently, economic data has not been promising, although purchasing managers’ indices (PMI) have shown some stabilization, despite weakness in the industry..