ECB Cuts Its Deposit Rate Further Into Negative Territory

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Today the European Central Bank cut its overnight deposit rate further into negative territory  by 10 basis points to -0.30 percent beginning on December 9, 2015 to penalize banks for parking money at the ECB and encourage lending in the overall economy.

The interest rate on the main refinancing operations and the interest rate on the marginal lending facility were left unchanged at 0.05 percent and 0.30 percent.

The ECB has already undertaken a €60bn per month quantitative easing program of government bonds that last until September 2016 and will soon announce any changes to this stimulus plan.

It is possible that more stimulus will be announced or its length could expanded since inflation in the 19 member euro currency zone increased just 0.1 percent in November.

Core inflation in the euro area dropped in November to 0.9 percent from 1.1 percent in October.

-Johnathan Schweitzer

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