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ECB cuts interest rates, expands bond-buying stimulus program

by ChemOrbis Editorial Team -
  • 10/03/2016 (17:59)
According to media reports, the European Central Bank (ECB) cut all main interest rates and surprisingly expanded its purchases of government bonds and other assets to €80 billion ($88.4 billion) per month from €60 billion in the previous months. The bank cut the deposit rate to -0.4% from -0.3% while also lowering main refinancing rate to zero from 0.05% and its marginal lending to 0.25% from 0.3%.

The bank also unexpectedly reported that they will begin buying corporate bonds as part of its asset purchase program and will also offer four-year loans to commercial banks in which the ECB will pay the banks interest on money they lend to businesses and consumers.

Previously, ECB president Mario Draghi had stated that they would extend their bond-buying program to at least March 2017 in order to speed up the bloc’s low inflation rate, which stands at around 0.1%, well below the Bank’s target of around 2%. According to official data, the region’s inflation rate was -0.2% in February.

In the final quarter of 2015, the eurozone economy grew 0.3% on a seasonally adjusted basis, in line with initial estimations, owing to higher investment spending. However, some economists commented that downside risks stemming from weak exports to emerging economies still remain in place.
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