The European Central Bank just plunged its deposit rate further into negative territory, from -0.30% to -0.40%.
In a move widely expected across the financial markets, the bank has decided to go even lower below zero, a strategy designed to boost inflation and encourage spending across Europe.
In a press release released on Thursday afternoon, the ECB said that it will cut rates, as well as increasing its QE programme to €80 billion per month from April.
The ECB has also cut its benchmark rate from 0.05% to exactly zero.
Following the decision, ECB President Mario Draghi will step up to take questions from the press — that could be pretty crucial.
While the rate cut itself doesn’t come as a surprise, markets in Europe and across the world will be waiting with bated breath to hear what Draghi says when he answers questions from journalists.
Draghi will likely address why the bank’s decided to cut rates at the press conference, as well as why it has extended its QE programme.
It’s also thought that Draghi might address the threat of low inflation within the Eurozone at the press conference.
After the ECB’s January meeting, Draghi pretty much telegraphed a cut in the base deposit rate at today’s meeting, saying in his press conference: “It will be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March.” He made the comment three times throughout the press conference.
Some have questioned Draghi’s wisdom in cutting rates even further. Prior to the announcement, CEO of Austrian bank Erste Bank, Andreas Treichl, told the Financial Times that “savers are risk adverse and capital markets are not very prominent” in his region, meaning “lowering interest rates is not very helpful in stimulating economic growth,” he said.
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