ECB Cuts Interest Rates to Near Zero

Business » FINANCE | June 5, 2014, Thursday // 15:25
Bulgaria: ECB Cuts Interest Rates to Near Zero Mario Draghi, President of the Europeam Central Bank (ECB). Photo by EPA/BGNES

European Central Bank (ECB) decided to slash benchmark interest to 0.15%, down from 0.25%, in a move aimed at stimulating economic growth in the Eurozone.

It also lowered the deposit rate below zero, placing it at -0.1%. This would force commercial banks to pay to lodge their money with the central bank instead of receiving any interest.

The ECB hopes such measures would encourage banks to lend to businesses and thus boost growth, the BBC reports.

Eurozone leaders have long been concerned over the sluggish pace at which GDP increases, with a slender 0.2% projected for 2014.

The threat of deflation is also looming across the euro area, with inflation value falling to 0.5% in May compared to 0.7% in April, while the ECB says it should be at 2%. The bank considers any value below 1% to be in the "danger zone".

Thursday's decision, however, was well below analysts' expectations that the European central lender could slash interest rates to 0.1% or even to zero.

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Tags: ECB, interest rates, inflation, deflation, Eurozone

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