Eurozone interest rates cut again as ECB matches Bank of England

The European Central Bank's president, Mario Draghi, slashed interest rates to a historic low yesterday as the central bank hinted at new initiatives to boost loans to small businesses and pledged to extend cheap funds to banks.

The quarter-point cut, against the backdrop of a persistent eurozone recession and record unemployment, brings the cost of borrowing to 0.5 per cent, on a par with the Bank of England. Mr Draghi said the ECB "stood ready to act" on further cuts if needed.

Most economists expected a cut after signs that the ECB's prediction for a recovery by the end of the year might not emerge. Mr Draghi warned that there were risks that "could dampen confidence and delay the recovery."

Lenders will be able to borrow as much as they want at the ECBs low refinancing rate until at least July next year, to ensure that liquidity is not a barrier to banks lending cash.

"There can't be fears of lack of funding as an excuse for not lending," Mr Draghi said following the council's meeting in Bratislava.

The central bank is launching a consultation with other European institutions to kick-start a market for asset-backed bonds backed by private-sector loans in a bid to free up money for lending.

Business loans have contracted and household credit is virtually stagnant this year according to the ECB's recent bank lending survey.

"The survey on the access to finance of small and medium-sized enterprises in the euro area indicates continued tight credit conditions, particularly for SMEs [small and medium-size enterprises] in several euro-area countries. Moreover, the available information indicates high-risk perception on the part of banks," Mr Draghi added.

Experts were disappointed by the lack of detail in Mr Draghi's plans and warned that the consultation could take a long time to bear fruit. Capital Economics' Jennifer McKeown said: "It's worrying that the discussion is in its initial stages and that they are far from reaching any conclusions. After all, this crisis has been going for years now. It's also disappointing that the ECB seems unwilling to buy any assets itself."

Mr Draghi also sent the euro lower by hinting that the ECB could charge banks to park money with it by cutting the deposit rate below zero, adding: "We are technically ready. There are several unintended consequences that may stem from this measure, but we will address and cope with these consequences if we decide to act.

"We will again look at this with an open mind and we stand ready to act if needed."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before