ECB widens negative rates

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The European Central Bank has cut another 10 basis points across all its key rates, taking the Deposit Facility rate to -0.20%, the Refinancing rate to 0.05%, and its Marginal Lending rate to 0.30%.

The Deposit Facility rate went negative earlier this year, explained by the bank as a way to make it “less attractive for people to save and more attractive to borrow”.

Additionally, the Bank said it would engage in buying asset backed securities starting in October, with underlying assets consisting of claims against non-financial private sector assets.

“This reflects the role of the ABS market in facilitating new credit flows to the economy and follows the intensification of preparatory work on this matter, as decided by the Governing Council in June. In parallel, the Eurosystem will also purchase a broad portfolio of euro-denominated covered bonds issued by MFIs domiciled in the euro area under a new covered bond purchase programme (CBPP3). Interventions under these programmes will start in October 2014. The detailed modalities of these programmes will be announced after the Governing Council meeting of 2 October 2014. The newly decided measures, together with the targeted longer-term refinancing operations which will be conducted in two weeks, will have a sizeable impact on our balance sheet.”

Bank president Mario Draghi said in his statement today announcing the cuts that the Bank had been forced to act in the face of unexpectedly weak growth in the eurozone in the second quarter this year.

He added: “With regard to the third quarter, survey data available up to August indicate a loss in cyclical growth momentum, while remaining consistent with a modest expansion.”

Eurozone GDP growth prospects for 2014 and 2015 have been revised downwards.


Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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