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ECB Cuts Rates, Boosts Stimulus in Raft of New Measures
All key interest rates cut and monthly bond purchases increased

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The headquarters of the European Central Bank in Frankfurt PHOTO: DANIEL ROLAND/AGENCE FRANCE-PRESSE/GETTY IMAGES
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TODD BUELLUpdated March 10, 2016 8:54 a.m. ET
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BREAKING NEWS


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FRANKFURT—The European Central Bank announced a package of six measures to revive inflationary pressure in Europe, cutting all of its key interest rates and increasing its monthly bond purchases under its asset-buying program.

The ECB on Thursday cut the level it charges on excess deposits by 0.1 percentage point to minus 0.4%. This means that banks have to pay even more now to leave excess funds with the central bank overnight.

It also cut its main interest rate, the rate it charges on regular bank loans, to an all-time low of zero percent from 0.05% where it was previously.


Markets reacted euphorically to the ECB’s package of measures. Germany’s DAX index rose by 2.5% following the news. France’s CAC 40 rose by 3%. “This has all the hallmarks of the ECB having thrown the kitchen sink at the problem,” said Aberdeen Asset Management Investment Manager Patrick O’Donnell.

MARKET TALK

Markets were begging for a surprise from the ECB. Here it is. And contrary to usual procedure, the ECB announced fresh stimulus measures along with its rate decision. The ECB’s has tended to leave any announcement of further measures--such as asset purchases or new refinancing operations--for Mario Draghi to announce at his news conference, starting at 1330 GMT. (emese.bartha@wsj.com; @EmeseBartha)

Market Talk is a stream of real-time news and market analysis that’s available on Dow Jones Newswires

In a change to its usual communication practices, the ECB announced all of its measures at its rate call, rather than waiting for President Mario Draghi’s news conference, which is due to start at 13:30 GMT. The ECB said Thursday that it would up the monthly volume of its bond buying program to €80 billion ($87 billion), from €60 billion previously.

It also decided to add investment-grade euro-denominated bonds issued by nonbank firms established in the euro area to the list of eligible assets that it can buy.

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The ECB also decided to extend its program of targeted loans to banks, designed to encourage banks to lend to the real economy. The ECB said that new four-year loans would be launched in June.

“Borrowing conditions in these operations can be as low as the interest rate on the deposit facility,” the ECB said in a statement.

The ECB also cut its interest rate on its overnight lending facility by 0.05 percentage point to 0.25%.

Write to Todd Buell at todd.buell@wsj.com