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Business

ECB cuts rates, expands asset purchase

The European Central Bank has delivered a surprise cut in interest rates. The move was accompanied by an announcement that it would also boost its large bond-buying program in a bid to kickstart the eurozone economy.

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ECB reaches for the big guns

The European Central Bank on Thursday cut all of its interest rates in order to head off the threat of low inflation while at the same time

boosting the sluggish eurozone economy.

In addition to cutting its benchmark refinancing rate for the first time to zero, the ECB lowered the deposit rate deeper into negative territory to -0.4 percent, marking another drop by 10 basis points.

The deposit rate is the rate the ECB charges financial institutions for parking their funds at the central bank.

ECB chief Mario Draghi said he hoped the further reduction in the deposit rate would force financial houses to stop amassing funds at the bank and instead pump the money back into the economy of the 19-member eurozone.

Investor confidence increases

Besides cutting interest rates, the ECB said it was also boosting its bond-buying program, increasing monthly asset purchases to 80 billion euros ($86.93 billion) a month from 60 billion.

The central bank announced it would also start buying corporate bonds under its quantitative easing (QE) program.

The bolder-than-expected monetary stimulus package caused European stocks to jump shortly after the ECB announcement, while the values of the euro eased against the dollar.

hg/cjc (Reuters, AFP)

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