Policymakers cut the already ultra-low main interest rate from 0.15% to 0.05%. They also made it more expensive for banks to park money with the ECB - cutting the deposit rate, which was already negative, from -0.1% to -0.2% in the hope of persuading banks to lend more to businesses and consumers.
The action took investors by surprise and drove the euro down more than
European stock markets rose following the decisive action from the ECB president,
"The ECB stepped up to the plate as the eurozone recovery is grinding almost to a halt," said
The central bank announced further measures to encourage lending by buying asset-backed securities. Full details will be published in October, Draghi said.
The ECB stopped short of embarking on full-scale quantitative easing (QE) which would potentially involve the bank purchasing government debt.
Draghi revealed the 24-strong governing council was split over the package of new measures, but said a "comfortable majority" was in favour. It is thought that
Speaking at a press conference following the decision, he said the eurozone's member states were also divided over QE.
"QE was discussed. Some members of the governing council were in favour of doing more, and some members were in favour of doing less. So our proposals strike the mid road." Draghi said interest rates would not be cut further.
The ECB nudged down its forecast for eurozone growth this year to 0.9%, from an earlier forecast of 1%. It also revised down its growth forecasts for 2015 to 1.6%, from 1.7%, but it revised up its forecast for 2016 to 1.9%, from 1.8%.
It lowered its forecast for inflation this year to 0.6% from a previous forecast of 0.7%, but Draghi said policymakers did not expect outright deflation, despite a current inflation rate of just 0.3%.
The ECB left its inflation forecast for 2015 and 2016 unchanged at 1.1% and 1.6% respectively.
There was zero growth in the eurozone economy in the second quarter, following 0.2% growth in the first quarter. Fears are mounting that rising tensions between the west and
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