ECB tries to boost stagnant eurozone by slashing interest rates to record low

The European Central Bank (ECB) has taken further action to boost bank lending and spur activity in the stagnating eurozone economy. A series of rate cuts had an immediate impact initially, with the value of the euro plunging against core currencies including the dollar and the pound - hitting its lowest level against the greenback since July 2013. The ECB trimmed its benchmark interest rate to 0.05% from a previous record low of 0.15%. It also raised its charge on banks to park money with it - the deposit rate doubling to -0.2% - in a bid to encourage banks to lend rather than hoard money.

QE was discussed. Some of our governing council members were in favour of doing more than I’ve just presented, and some were in favour of doing less. So our proposal strikes the mid-road.

ECB president Mario Draghi

ECB president Mario Draghi also confirmed the governing council had decided to start unconventional monetary policy though it stopped short of quantitative easing. He said the ECB would start purchasing asset-backed securities and covered bonds in October - a scheme he described as credit easing - which sources said could amount to €500bn over three years.

The euro is likely to weaken against the dollar and the pound and that’s probably a good thing.

Andrew Sentance, former Bank of England Monetary Policy Committee member

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