European Central Bank's stimulus package fails to revive financial markets

By Jess Shanahan

In an effort to revive financial markets the European Central Bank (ECB) cut interest rates from 0.05 percent to 0. However, the region’s stock markets only enjoyed a brief bounce as ECB’s Chief Mario Draghi played down the possibility of further cuts to interest rates.

At a news conference when the stimulus package was announced Draghi said: “From today’s perspective and taking into account the support of our measures to growth and inflation, we don’t anticipate that it will be necessary to reduce rates further. Of course, new facts can change the situation and the outlook.”

Investors seem unconvinced by these measures as the stock market closed sharply down after the package was announced.

As part of this bold move from the ECB, there will also be a reduction in the interest rate on deposits held by banks at the ECB to minus 0.4 percent, from minus 0.3 percent. This encourages banks to lend rather than holding money in the central bank.

More lending would promote growth and put more money into the economy. The rate cut and the other measures to expand stimulus underline how far the ECB sees itself from achieving its goal of inflation of just under 2 percent.

Low or negative inflation has raised fears that Europe may become stuck in deflation, in which stagnant prices weigh on wages, investment and economic growth for years.

Follow @BizReviewEurope

Share

Featured Articles

Meet the COO: Brook Sims of MAC Diversity Recruiters

Passionate about helping others find their voice, diversity leader and COO Brook Sims talks powerful leadership, diverse teams and being a change agent

Best business books to improve leadership strategy

From strategic guides to inspiring CEO memoirs, these new books dish up plenty of principles, strategies, and anecdotes to help you become a better leader

Shoplazza founder and CEO Jeff Li, ex Baidu, on leadership

Named in Fortune China’s 40 under 40 for 2022, former Baidu head Jeff Li is the entrepreneurial founder and CEO of ecommerce platform Shoplazza

The office shifts to new way of working – workplace special

Leadership & Strategy

Trailblazer: Clorox's DEI leader Shanique Bonelli-Moore

Sustainability

The inspirational CEO story – Dean Forbes of Forterro

Leadership & Strategy