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Ceturtdiena 08.12.2016 | Name days: Gunārs, Vladimirs, Gunis

European Central Bank reduces the base interest rate

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUOn Thursday, 10 March, the European Central Bank made the decision to reduce the base interest rate and increase the volume of the bond purchase programme in an attempt to enhance Eurozone’s sluggish economic growth and increase the dangerously low inflation.

ECB has reduced the interest rate for the main re-financing positions from 0.05% to 0%, which is an all-time lowest level.

Also, the bank has reduced the deposit rate by 0.1 percentage point – to -0.4%.

The 24-hour rate has been reduced by 0.5 percentage points. From now on it will be 0.25%.

The new interest rates will come into force on 16 March.

Analysts had predicted that the interest rate for the main re-financing positions and 24-hour rate would remain unchanged. Only the reduction of deposit rates has complied with their prediction.

At the same time, ECT has decided to increase the volume of the so-called quantitative easing programme from EUR 60 billion to EUR 80 billion per month.

This increase also came as a surprise for analysts, who had predicted that the quantitative easing programme would only grow by EUR 10 billion.

In order to assist the recovery of Eurozone’s economy, ECB and Eurozone’s national central banks began procuring bonds as part of the quantitative easing programme on 9 March 2015, hoping to prevent the lasting deflation period and assist the growth of Eurozone’s economy.

Analysts had previously predicted that ECB would announce new stimulation measures, considering the decline of consumer prices in February 2016.

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