The European Central Bank on Thursday cut interest rates by 25 basis points, trimming borrowing costs to below 1 per cent for the first time since the launch of the euro as it tries to revive the eurozone economy.
The forecast reduction in the ECB's benchmark refinancing rate to
0.75 per cent came against the backdrop of deepening economic gloom
in the 17-member currency bloc, which was forged more than a dozen
years ago.
The decision also represented the third time that ECB chief Mario
Draghi has delivered a rate cut since taking over as bank head last
November. The ECB also reducted its deposit facility rate by 25 basis
points to zero.
The Frankfurt-based ECB's move coincided with an announcement by
the Bank of England (BoE) that it was pumping an additional 50
billion pounds (62.6 billion dollars) to stimulate Britain's economy.
Following a meeting in London, the BoE's Monetary Policy Committee
said it would boost its asset purchase programme - or quantitative
easing - to 375 billion pounds after its July meeting. The bank left
rates on hold at 0.5 per cent.
The ECB's rate announcement followed the new measures unveiled
last week by European leaders aimed at easing the pressures on
eurozone bond markets and spur economic growth.
The spotlight is now likely to be on Draghi's press conference
after the announcement.
Draghi is likely to be pressed by reporters to provide more
details on the bank's new role in supervising the eurozone's largest
lenders as envisaged by European leaders at a summit last week.
In addition, the 64-year-old ECB chief is likely to be quizzed on
how far the bank might be prepared to go in easing the tough bailout
terms facing Greece, which is struggling to meet targets set by
international creditors.
Interest rates in the currency bloc have been on hold since
December when the bank lowered borrowing costs to 1 per cent and
began rolling out cheap loans to banks totalling more than 1 trillion
euros (1.26 trillion dollars).
The move was designed to head off a credit crunch. It also helped
lower the borrowing costs of heavily indebted eurozone members Spain
and Italy.
Some analysts believe the ECB could follow up the rate cut with an
announcement in the coming months of a new cheap loans programme to
try to shore up investor confidence in the eurozone.
