The European Central Bank, which sets monetary policy for the 17 European Union countries that use the euro, cut its main interest rate by a quarter of a percentage point to a new record low of 0.5 per cent.
The ECB’s president, Mario Draghi, also hinted that the bank could do more in coming months to get the eurozone economy growing again. That could include setting a negative deposit rate — meaning it would charge banks to place money with the ECB, encouraging them to lend it out instead.
Here are some reactions from economists:
— Chris Williamson, chief economist at Markit: “At last, the fastest contracting region in the world no longer has the highest central bank policy rate of all major developed economies.”
— Tim Ohlenburg, senior economist at the Centre for Economics and Business Research: “A cut in interest rates has long made sense given the scale of the eurozone’s fundamental economic weakness.”
— Jennifer McKeown, senior European economist at Capital Economics: “The ECB’s widely anticipated interest rate cut should provide troubled banks in the region’s periphery with some much-needed support. But it will not be enough to drag the eurozone out of recession on its own and bolder plans to boost lending to small and medium sized enterprises seem to be in their infant stages to say the least.”
— Howard Archer, chief European economist at IHS Global Insight: “The ECB’s cut may have a downward impact on bond yields as well as some softening impact on the euro, which would be generally helpful to growth prospects. Having said that, any further impact on bond yields is likely to be modest as the ECB’s cut has been increasingly anticipated and it may already be, at least partially, incorporated in current bond prices.”
— Craig Erlam, market analyst at Alpari: “Draghi conceded that the ECB did discuss a 50 basis point cut to the main rate, which along with many other dovish comments during the press conference, certainly leaves the door open to another rate cut in the coming months.”
— Benjamin Reitzes, senior economist at BMO Capital Markets: “Draghi said the ECB ‘stands ready to act if needed’ and that they are open to negative deposit rates. That suggests further rate cuts remain a possibility.”