ECB President Mario Draghi Discusses Shock Decision To Cut Rates In Press Conference

Mario draghiREUTERS/John SchultsEuropean Central Bank President Mario Draghi.

ECB president Mario Draghi just held his monthly ECB press conference.

The central bank shocked markets with a surprise decision to lower its benchmark refinancing rate to 0.25% from 0.50% earlier today. The euro is down 1.1% against the dollar, and European stock indices are surging.

In his opening remarks, Draghi said the central bank took a number of decisions in line with its forward guidance.

The ECB will extend fixed-rate refi tender procedures with full allotment until mid-2015.

Draghi acknowledged falling inflation, saying the decline was stronger than expected and that inflation should remain at low levels in the coming months as underlying price pressures remain subdued.

However, he also acknowledged recent survey data, which point to tentative stabilisation in the euro area economy.

During the Q&A, Draghi said the ECB discussed the deposit facility rate, which it chose to leave unchanged at 0% in November, but it did not discuss long-term refinancing operations (LTRO) in any significant way.

He also asserted that exchange rates were not a part of the Governing Council’s discussion today — as the ECB does not target exchange rates — though they are important for growth and inflation.

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