ECB cuts rates to new low, no move on bolder measures
The European Central Bank cut interest rates to a record low today to breathe life into a deteriorating euro zone economy but steered clear of more dramatic measures such as buying government bonds or flooding banks with fresh liquidity.
The quarter-point cut in the ECB's main refinancing rate to 0.75 percent was in line with market expectations and followed a dire batch of economic data that show even euro zone powerhouse Germany is entering a modest downturn.
In his monthly news conference, ECB President Mario Draghi said the euro zone economy would recover only gradually, threatened by the debt problems of several of the bloc's members and banks' unwillingness to lend.
"The risks surrounding the economic outlook for the euro area continue to be on the downside," Draghi told a news conference. "Beyond the short term, we expect the euro area economy to recover gradually, although with momentum dampened by a number of factors. In particular, tensions in some euro area sovereign debt markets and their impact on credit conditions."
In addition to cutting the main refinancing rate, the ECB also reduced its deposit rate, which acts as a floor for the money market, to zero from 0.25 percent.
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