Brussels, Belgium (4E) – The European Central Bank (ECB) made a surprising decision to lower interest rates aimed to boost economic growth and tackle the risk of deflation.
The ECB has cut its benchmark interest rate to 0.05 percent, following an earlier rate cut to 0.15 percent from 0.25 percent in June. The bank also discussed the possibility of introducing new stimulus measures.
The rate cuts come after the euro zone economy stagnated in the second quarter as the gross domestic product stayed flat. Germany, the common currency bloc’s largest economy, contracted by 0.2 percent.
The central bank will also introduce an asset purchase program that will buy products from lenders, hoping that the move will improve liquidity to the financial system and increase lending.
Reports surfaced that the ECB’s Governing Council discussed plans to outline a purchase program for asset-backed securities and covered bonds valued at around 500bn euros ($656bn), citing sources familiar with the matter. The program would last for three years and the ECB could begin purchasing the assets this year, the report said.