On Thursday ECB President Mario Draghi cut interest rates from 1.25% rates 25 basis points to 1.0% down from 1.25% in a move aimed at lower borrowing costs and spurring growth in Europe. Draghi also loosened collateral requirements for European lenders. Draghi refused to signal any new bond purchases by the ECB which some economists had been expecting to help stabilize the euro zone.
Draghi was questioned by reporters and responded directly to questions about the ECB decision to not purchase bonds. Draghi said that the EU Treaty prohibits monetary financing. He also rejected the proposal for the ECB to lend money to the IMF which would exclusively be used to help indebted countries in the European Union. The market dropped lower after hearing Draghi’s remarks.
* Due to technical problems, I have been unable to publish longer articles about this topic on this website. I am working to resolve this problem. A longer and more thorough article will be written on this topic later tonight or early Friday morning. Stay tuned.