European CB cuts key rate, to resume bond-buying

ANKARA

The European Central Bank (ECB) on Thursday decided to cut key interest rates, confirming a new stage of bond purchases to shore up euro zone growth. 

The ECB cut its deposit rate to a record low minus 0.5% from minus 0.4% and will restart bond purchases of €20 billion ($22 billion) a month from Nov.1, according to a statement by the ECB’s Governing Council.

“The interest rate on the main refinancing operations and the rate on the marginal lending facility will remain unchanged at their current levels of 0.00% and 0.25% respectively,” it said.

Speaking at a news conference in Frankfurt, the bank’s head Mario Draghi said: “We now expect the key ECB interest rates to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics”.

The services and construction sectors show ongoing resilience and the euro area expansion is also supported by favorable financing conditions, further employment gains and rising wages, he added.

Pointing at macroeconomic projections for the euro area, he said these projections foresee annual real GDP increase by 1.1% in 2019, 1.2% in 2020 and 1.4% in 2021.

“The risks surrounding the euro area growth outlook remain tilted to the downside, mainly pertaining to the prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets,” Draghi said.
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