ECB signals long period of very low rates

As expected, the ECB cut its main interest rates at last week’s meeting of the governing council in a bid to counteract very low inflation and weak growth.

The key refinancing rate was reduced from 0.25% to 0.15%. Meanwhile, the deposit rate has moved into negative territory, after also having been cut by 10 basis points from 0% to -0.1%.

These are record low interest rates. The ECB also announced a number of unconventional policy measures. These include two, targeted longer-term refinancing operations whereby the ECB will provide up to €400bn to banks for a four-year period at very low interest rates. The funds come with certain provisions to ensure they are used to support lending.