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| ECB cuts key rate by 25bps, sees room for more reduction |
| Bloomberg / Apr 03, 2009, 00:21 IST |
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European Central Bank President Jean-Claude Trichet said policy makers are ready to lower their benchmark interest rate further, while the deposit rate has probably reached its floor.
“I don’t exclude that we could in a very measured way go down from the present level” of 1.25 per cent, Trichet said at a press conference in Frankfurt today. The deposit rate is at “an extremely low level at 0.25 per cent, and I don’t expect that we’ll move in the period to come.”
The ECB is slowing the pace of rate cuts as council members try and find a consensus on what new measures to take next as rates approach zero. The ECB is already lagging counterparts such as the US Federal Reserve, the Bank of England and the Bank of Japan, which are pumping money into their economies by buying government and company securities.
The ECB today lowered its key interest rate by 25 basis points, less than economists expected, even as the euro-region economy shows signs of slipping deeper into recession. Trichet said today that the bank will announce “full details” of possible further non-standard measures in May.
The euro rose more than a cent against the dollar after today’s decision, climbing as high as $1.3493. It traded at $1.3431 at 3:31 p.m. in Frankfurt. The ECB currently uses the deposit rate to steer short-term market borrowing costs while lending banks as much cash as they need against eligible collateral for periods of up to six months.
ECB Vice President Lucas Papademos last week stoked speculation the ECB could soon announce plans to buy corporate debt, when he said March 26 that such a step may be “warranted” to “enhance liquidity.” Other ECB council members such as Axel Weber and Juergen Stark have signaled opposition to such a move. “There was no intention to prepare the market” for any non-standard measures at today’s meeting, Papademos said at the press conference today when pressed by reporters.
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