ECB cuts key rates, beefs up QE
Frankfurt, March 10
The European Central Bank (ECB) came out all guns blazing today to jumpstart the stalled eurozone economy, slashing already record-low interest rates, pumping massive new sums into the banking system and, for the first time, buying corporate bonds.
The unprecedented scale of the ECB’s action took financial markets by surprise, sparking a dramatic rise in eurozone stock markets and sending the euro lower against the dollar.
“The central bank came out all guns blazing today, cutting rates across the board and increasing both the size of the quantitative easing (QE) programme and the list of eligible assets,” said Craig Erlam, senior market analyst at Oanda.
The ECB said it is cutting its central ‘refi’ refinancing rate to zero per cent from 0.05 per cent previously.
The rate on its marginal lending facility is going down to 0.25 per cent from 0.30 per cent and on the deposit facility to minus 0.40 per cent from minus 0.30 per cent.
The ECB said it would also expand the volume of bonds it purchases each month under its programme of quantitative easing to 80 billion euros from 60 billion euros.
And it would also start buying corporate bonds under the QE programme.
It further launched a new round of massive cheap loans for banks, known as TLTRO, from June.
The slew of measures came as inflation slipped back into negative territory in February for the first time in five months and as the economic outlook for the bloc was looking gloomier.