The European Central Bank and Mario Draghi announced today a new cut in the deposit interest rates. The rate cut will be 10 basis points and down by -0.30%. The deposit rate has been cut from -0.2% to -0.3%.
“At today’s meeting the Governing Council of the ECB decided that the interest rate on the deposit facility will be decreased by 10 basis points to -0.30%, with effect from 9 December 2015.
The interest rate on the main refinancing operations and the interest rate on the marginal lending facility will remain unchanged at 0.05% and 0.30% respectively.” ( via ECB)
The ECB apparently took this action in order to tackle weak euro inflation, while more economic stimulus should be expected shortly.
Sky News notes, that “the idea behind growing the negative rate is to make it less attractive for banks to hoard money and lend it instead.”
EU officials hailed the deposit rate cuts and saw it as a chance for further growth and development.
@ecb‘s additional monetary stimulus gives time for Member States to do structural reforms & strengthen economic recovery.
However, Draghi’s deposit rate cut disappointed the markets and have some journalists call its “bazookas” rate cut.
And why was Draghi’s cut disappointing? Here is why:
Draghi dashes hopes of major QE expansion
Mario Draghi, the president of the European Central Bank, has dashed investors’ hopes of a significant expansion of its quantitative easing programme to boost the flagging eurozone economy.
The euro jumped on foreign exchanges during Draghi’s press conference in Frankfurt, as he said the ECB had decided to cut the deposit rate on bank reserves, and extend QE by six months – but would not step up the pace of bond buying.
The ECB said it would cut the deposit rate on reserves held at the central bank to -0.3%, from -0.2%. At the subsequent press conference on Thursday, Draghi said the ECB would extend its quantitative easing programme – aimed at boosting inflation and bolstering growth – by six months, to March 2017.
But the 0.1 percentage point cut in the deposit rate was smaller than investors expected, and the pace of bond buying will remain at €60bn a month, which could suggest more sceptical members of the ECB’s governing council, such as Bundesbank president Jens Weidmann, blocked a more aggressive cut….. (via the Guardian)
PS cut everything! rates, interests, investments, growth, development. Main thing there is a Euro central banking.