The European Central Bank (ECB) surprised financial markets today, Thursday September 4th by paring back its key interest rates to new all-time lows. Against a background of growing concern that the single currency area is on the verge of deflation, the ECB cut its central “refi” refinancing rate to 0.05 per cent from 0.15 per cent.
It also lowered the deposit rate to minus 0.20 per cent from minus 0.10 per cent and trimmed its marginal lending rate to 0.30 per cent from 0.40 per cent, it said in a statement.
Few analysts had expected any further rate cuts this month, arguing that, with eurozone borrowing costs already at record lows, a cut would not prove particularly effective.
EUR/USD dropping to the 1.3000 level after the news, down roughly 1% on the day. Courtesy: cTrader platform
ECB President Mario Draghi was scheduled to explain the reasoning behind the move at his regular monthly post-meeting news conference. And the financial markets are betting on additional policy easing measures, such as the announcement of an asset purchase program, analysts said.