European Central Bank cuts deposit rate

The European Central Bank announced Thursday it will cut its deposit rate and make new monthly bond purchases in the billions among other steps to help boost the Eurozone economy.

ByClyde Hughes

In a statement, the ECB dropped its deposit rate from minus 0.4 percent to minus 0.5 percent and said it would start buying securities of 20 billion euros, or $22.06 billion, monthly starting Nov. 1.

“The Governing Council now expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 percent within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics,” a statement from the ECB said.

The central bank also said reinvestments of the principal payments from maturing securities purchased under the (Assets Purchasing Program) will continue and it will introduce a two-tier system for reserves to support bank-based transmission of its monetary policy.

President Donald Trump appeared to use the central bank’s measures to continue his criticism of the U.S. Federal Reserve on Twitter Thursday.

“European Central Bank, acting quickly, cuts rates 10 basis points,” Trump said. “They are trying, and succeeding, in depreciating the Euro against the VERY strong dollar, hurting U.S. exports…. And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest.”

ByClyde Hughes