ECB Cuts 10 Basis Points Across The Board

Frankfurt (Sept 4)  After introducing negative interest rates in May, the ECB has cut interest rates again. Consequently, Euro hits 1-1/2-month low of 1.3036 VS US DOLLAR AFTER ECB RATE CUT.

The central bank cut the rate on its main refinancing operation by 10 basis points to 0.05%; its marginal lending facility rate was cut 10 basis points to 0.30%, and its deposit facility was also dropped 10 basis points to negative 0.20%.

According to some analysts, markets were almost evenly split, expecting that the central bank would cut interest rates by 10 basis points. The ECB not only has to stimulate growth but stave off growing deflationary concerns. On Friday Eurostats, the European Union's statistical agency, reported that August’s  inflation hit 0.3%, a five year low, down from 0.4% in July. Inflation remains well below the central bank’s target of 2.0%.

Earlier last month, Eurostats reported that the eurozone economy grew 0.2% in the second quarter. The region's weak economic outlook was led by Germany, as the economy contracted by 0.2% and France showed zero growth during the quarter.

Economists and analysts will now have to wait for ECB President Mario Draghi’s monthly press conference to see if the central bank will announce any quantitative easing strategy. Anticipation has been growing since Draghi introduced the idea during the global central bank meeting at Jackson Hole, last month.

Source: KitcoNews