What to expect from the Euopean Central Bank decision:
Thursday's policy meeting will mark ECB President Mario Draghi's last after eight years directing the eurozone's central bank.: Outgoing European Central Bank president Mario Draghi has announced it will restart its quantitative easing measures and has cut its bank deposit rate to an all-time low of -0.5% in a bid to stimulate the flagging eurozone economy.
The ECB will resume buying up eurozone government bonds at a rate of €20 billion as from November, “for as long as necessary,” it said. The quantitative easing could encourage those governments to borrow more money to invest in national projects. The eurozone’s central bank lowered rates for banks depositing their money by 10 basis points, after leaving the already record low rate of -0.4% unchanged in July. The changes are in line with economists’ predictions and are intended to boost inflation, currently running at 1%, closer to its 2% target.
Deeper negative interest rates will cut even more into the profitability of European banks. But the ECB announced a “two-tier, to take"timely and effective" fiscal action, i.e. up government spending.
Eurozone inflation is running at just 1% and with just 1.1% year-over-year growth in the second quarter while the 19 country monetary bloc faces significant headwinds from the U.S-China trade war, Brexit uncertainty and signs that the German’s economy, Europe’s largest, is heading for recession.
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