French President-designate of the European Central Bank (ECB) Christine Lagarde reacts during a meeting prior’s to attend a European Parliament’s Committee on Economic Affairs at the EU Parliament, in Brussels, on September 4, 2019.
JOHN THYS | AFP | Getty Images
The European Central Bank decided Thursday not to cut interest rates, despite market expectations for a reduction amid the ongoing coronavirus outbreak.
However, the central bank did announce Thursday measures to support bank lending and expanded its asset purchase program by 120 billion euros ($135.28 billion).
Market participants were expecting a rate cut of 10 basis points as a way to stimulate the euro economy amid fears that a recession is about to hit the region. Both the Federal Reserve and the Bank of England cut rates over the last week as ways to support their respective economies.
The ECB’s main rate stands at -0.5%. The negative rate is meant to spur banks to loan money rather than park it at the central bank.
The coronavirus, which began in China at the end of 2019, has spread worldwide. There are more than 127,000 confirmed cases globally, according to data from Johns Hopkins University. Italy, one of the biggest economies in the euro area, has the highest number of cases outside China and has implemented a nationwide lockdown.
More QE and bank lending
ECB President Christine Lagarde said earlier this month that the bank was “ready to take appropriate and targeted measures” to deal with the economic impact from the virus.
As such, the ECB’s decision to boost lending to banks and increase its bond-buying program was expected.
The central bank had restarted purchasing government bonds indefinitely in November at a pace of 20 billion euros a month. This will now be increased by 120 billion euros throughout 2020.
Source: Business - cnbc.com
