Losing momentum': ECB cuts interest rate to new record low of 0.05%

Losing momentum': ECB cuts interest rate

The European Central Bank unexpectedly cut interest rates to 0.05% from 0.15% in a strong response to combat deflation. The move comes as the EU is struggling to boost its stagnating economy, which Draghi
“Growth recovery was losing momentum,” ECB President Mario Draghi said at the news conference after the announcement was made to cut rates further.
The ECB's main refinancing rate has been cut 10 basis points to 0.05 percent, its marginal lending facility was decreased 10 basis points to 0.3 percent, and its deposit facility decreased 10 basis points to stay in negative territory at -0.2 percent.
“The main reason is to make sure there are no misunderstandings that we’ve reached the lower bound. Now we are at the lower bound," Draghi
said.
Mario Draghi explained that the ECB decided to cut the rate in response to seeing inflation expectations worsen in August. Inflation is dangerously low, currently at 0.3 percent less than half the 2 percent target range.
Draghi announced the bank has trimmed its GDP forecast for the 18-member eurozone to 0.9 percent in 2014 and 1.6 percent in 2015.
The ECB president said quantitative easing was discussed, but there was no agreement between governing council members to begin stimulus bond purchases.
The benchmark refinancing rate is the amount banks pay the ECB for credit, and the lower the rate, the more customers and businesses are incentivized to borrow, spurring lending and growth.