ECB cuts rates, raises stimulus

President of the European Central Bank Mario Draghi addresses the media following the meeting of the Governing Council in Germany, on March 10, 2016.
President of the European Central Bank Mario Draghi addresses the media following the meeting of the Governing Council in Germany, on March 10, 2016. PHOTO: AFP

European Central Bank president Mario Draghi unleashed his most audacious stimulus package yet, unexpectedly testing the lower bounds of all the ECB's interest rates and expanding its monthly bond purchases by a third.

The euro sank and stocks rose.

ECB dropped its main refinancing rate to zero from 0.05 per cent, while cutting the deposit rate to minus 0.4 per cent from minus 0.3 per cent, charging banks more to keep their money with the ECB.

 

The bank also expanded its quantitative easing asset-buying programme to €80 billion (S$120 billion) a month from €60 billion.

"This comprehensive package... has been calibrated to further ease financing conditions, stimulate new credit provision and thereby reinforce the momentum of the euro area's economic recovery and accelerate the return of inflation to levels below but close to 2 per cent," Mr Draghi said at a press conference.

A version of this article appeared in the print edition of The Straits Times on March 11, 2016, with the headline 'ECB cuts rates, raises stimulus'. Print Edition | Subscribe