News Column

Eurozone interest rates cut

September 5, 2014

ellen thomas; ellen thomas

EUROZONE interest rates have been cut to 0.05 per cent in the latest bid to breathe new life into the continent's moribund economy.

The European Central Bank (ECB), led by Mario Draghi, came under pressure to act after inflation sunk to 0.3 per cent last month.

Meanwhile, growth across the 18-nation bloc had ground to a halt in the second quarter as fears over the Ukraine crisis hit confidence.

The ECB had already cut interest rates from 0.25 per cent to 0.15 per cent in June but has now decided that even stronger medicine is needed, as it cut growth forecasts for this year and next.

It also cut the overnight deposit rate for lenders that hold money with it to -0.2 per cent - a rate that had already been slashed below zero to -0.1 per cent.

Mr Draghi said that in addition, the bank would start a new stimulus programme buying asset-backed securities.

Howard Archer, chief UK and European economist at IHS Global Insight, said the ECB move showed just how worried it was about the economy. That came as the Bank of England left interest rates on hold at 0.5 per cent and kept the quantitative easing scheme pumping pound(s)375 billion into the economy at the same level, despite the UK's accelerating growth.

Martin Beck, senior economic adviser to the EY ITEM Club, said: "The case for leaving rates on hold (in the UK) for a few more months hasn't lost its strength.

"If anything, following the decision by the ECB to cut borrowing costs, it has arguably been reinforced."

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Source: Herald, The (Scotland)

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