Mario Draghi bets on massive QE boost
Borrowing costs for banks and big business are set to plunge after the European Central Bank (ECB) pulled out all of the stops in its efforts to lift inflation.
ECB president Mario Draghi cut the interest it pays banks deeper into negative territory yesterday - it will now cost banks 0.04pc to leave money on deposit with the central bank.
Negative interest rates are supposed to drive cash into the real economy and ultimately to stimulate growth, but are proving controversial.
A year after the policy was launched the ECB yesterday said it has cut its inflation forecast for this year from one percent to just 0.1pc, massively adrift from the 2pc a year target.
In a bid to lift inflation the deposit rate paid to banks was cut and the main refinancing rate in the Euro area shaved to zero from 0.05pc. The marginal lending rate - used by banks to borrow from the ECB overnight - fell to 0.25 pc from 0.3pc.
The ECB will also now buy up more financial assets on the markets as part of the effort to boost credit more widely in the Eurozone economy, including corporate but not bank bonds.