ECB cuts key deposit rate to -0.30%, leaves other rates unchanged

European Central Bank (ECB) President Mario Draghi. PHOTO: REUTERS
European Central Bank (ECB) President Mario Draghi. PHOTO: REUTERS

FRANKFURT (AFP) - The European Central Bank on Thursday cut one of its key interest rates, the so-called deposit rate, to minus 0.30 percent in a bid to kickstart chronically low inflation in the euro area.

At the same time, the ECB held its other two key interest rates, the refi and the marginal lending rates, unchanged at 0.05 per cent and 0.30 per cent respectively.

In addition to the reduction in the deposit rate - which effectively charges banks for parking cash overnight at the ECB - central bank president Mario Draghi would announce "further monetary policy measures" at his traditional post-meeting news conference, the ECB said in a statement.

Analysts expect Mr Draghi to announce a beefing up of the bank's controversial bond purchase programme, known as QE.

In a bid to bring eurozone inflation back up to levels conducive to healthy economic growth, the ECB has already unleashed an unprecedented series of easing measures.

It has slashed borrowing costs, made vast amounts of cheap loans available to banks and most recently embarked on a programme to buy around 60 billion euros (S$89 billion) of sovereign bonds each month until at least September 2016.

But inflation across the eurozone is still stubbornly low, standing at just 0.1 per cent in November, far below the ECB's target of just under 2.0 percent.

And so analysts expect the programme to be increased and extended beyond September 2016.