Bank fires ‘a big bazooka’ in surprise measures to get Europe booming again

Bank bosses unveiled a raft of unexpected measures on Thursday as they moved to breathe life into Europe’s flagging economy. The European Central Bank cut all its main interest rates, expanded its bond-buying stimulus programme and offered new cheap long-term loans to banks. It was seen as an aggressive move to stimulate a stagnating economy and a response to criticism that it was not doing enough to help. As a result, stock markets across Europe rallied strongly, with shares in banks leaping by as much as 5%.

This was a much bigger bazooka than the market was expecting

John Hardy, head of currency strategy at Saxo Bank

Measures included cutting its main benchmark rate to zero from 0.05%. The bank deposit rate.was lowered to minus 0.4%, down from minus 0.3%, sp banks must pay more to deposit funds with the ECB. Monthly bond purchases were raised to €80bn ($88bn) from €60bn, pushing more newly printed money into the economy. Part of the aim is to push inflation up from 0.2% towards its 2% target.

The ECB has come out of gates drumming big beats and firing on all cylinders. The big question is if this is not going to work then we have serious trouble.

Naeem Aslam, chief markets analyst at AvaTrade

european central bank