ECB fires off new volley of shots in eurozone's anti-deflation battle
FRANKFURT - The European Central Bank on Thursday fired off a new volley of shots in its ongoing battle to avert deflation in the euro area and jumpstart economic recovery in the region.
The ECB slashed already record-low interest rates, said it would pump massive new sums into the banking system and, for the first time, would start buying corporate bonds.
Initially, the unprecedented scale of the ECB's action took financial markets by surprise, sparking a rise in eurozone stock markets and sending the euro lower against the dollar.
But stock prices subsequently fell back.
"Wow. In almost every respect, the ECB went beyond expectations today," said Berenberg Bank economist Holger Schmieding.
"The central bank came out all guns blazing," agreed Craig Erlam, senior market analyst at Oanda.
The ECB lowered the main rate at which it lends to commercial banks -- the so-called refi rate -- to zero for the first time ever from 0.05 per cent.
It pushed the interest rate on its deposit facility for commercial banks to -0.40 per cent from -0.30 per cent. This means commercial banks in fact pay the ECB if they choose to transfer their excess funds at the end of the day.
The rate on its marginal lending facility, by which the ECB offers overnight credit to banks, is going down to 0.25 per cent from 0.30 per cent.
The ECB also announced it would expand the volume of bonds it purchases each month under its programme of quantitative easing to 80 billion euros ($88 billion) from 60 billion euros. And it would also start buying corporate bonds under the QE programme.
- AFP
RELATED