Business World

Thursday 22 August 2019

ECB pushes back rate hike again as outlook darkens

(Stock image)
(Stock image) Business Desk

The European Central Bank pushed back the timing of its first post-crisis interest rate hike again on Thursday and said it would continue paying banks for lending in its latest effort to revive a slowing euro zone economy.

The moves, which are bolder than analysts had expected until only a few weeks ago, come as a trade war between the United States and China overshadows the global economy and especially export-oriented euro zone countries such as Germany.

Responding to rapidly deteriorating inflation expectations, the ECB pledged to keep its interest rates at their current, record-low level at least through the first half of 2020, instead of the end of this year as it had said only in March.

It will also let banks borrow from the ECB at rate just 10 basis points above its minus 0.4pc deposit rate provided they beat the ECB's lending benchmarks in a new targeted longer-term refinancing operation, or TLTRO.

"For banks whose eligible net lending exceeds a benchmark, the rate applied in TLTRO III will be lower and can be as low as the average interest rate on the deposit facility prevailing over the life of the operation plus 10 basis points," the ECB said in a statement.

With pervasive uncertainty already denting trade, big central banks like the ECB and the US Federal Reserve appear to have given up on plans to tighten policy and markets are now positioned for easing.

More to follow


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