European Central Bank cuts interest rates

European Central Bank cuts interest rates

The European Central Bank has decreased its interest rates to 0.25% EPA in an attempt to avoid a collapse in the Eurozone.

Pressure in the region with inflation reaching 0.7% – a four year low – caused the ECB to make a mover earlier than analysts anticipated. The main rate dropped from 0.5% to 0.25% and has already had beneficial repercussions, including a lower Euro, higher government bond prices, and share market highs.

The interest rate on the marginal lending facility was also cut, dropping by 0.25 percentage points to 0.75%. Interest rates on the ECB’s deposit facility have been held at zero, making the decision not to take it into negative figures.

Although the threat of deflation is still present, the ECB’s pro-active stance on this has helped the strength of the Euro against the dollar.