Finally, the New Zealand dollar was broadly flat versus the greenback changing at US$0.6652, after registering declines in wake of the Reserve Bank of New Zealand’s decision to cut its benchmark interest rate by 25 basis points to a record low of 2.25%; the fifth such move since June 2015.
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European Central Bank launched an unexpectedly broad array of stimulus measures Thursday aimed at boosting a modest economic recovery in the 19 countries that use the euro and nudging up dangerously low inflation.
The ECB cut its deposit facility rate deeper into negative territory, from minus 0.3 percent to minus 0.4 percent, and expanded its asset-purchase program to 80 billion euros a month ($88 billion) from 60 billion euros ($66 billion).
Outside the eurozone, London’s FTSE index dropped 1.8 percent.
The ECB will offer banks loans at zero interest, for as long as four years.
Many analysts considered the market reaction rather perverse given the ECB’s actual steps were very aggressive. This means commercial banks in fact pay the ECB if they choose to transfer their excess funds at the end of the day. United States crude fell 1 per cent.
Having healthy banks is crucial because they provide most business financing in Europe – a contrast with the United States, where most business credit comes from financial markets.
But the euro bounced back nearly 4c after European Central Bank president Mario Draghi suggested this was the last round of stimulus.
European stocks initially soared, led by the banking sector, and the euro fell more than 1.4% before recovering during Mr. Draghi’s press conference. The ECB’s inflation forecast for this year is a meager 0.1% increase.
The Dow Jones industrial average fell 5.23 points, or 0.03 per cent, to 16,995.13, the S&P 500 gained 0.31 points, or 0.02 per cent, to 1,989.57 and the Nasdaq Composite dropped 12.22 points, or 0.26 per cent, to 4,662.16.
The markets expect action but are nervous after last December’s package of measures failed to meet expectations. A rising currency would weigh on the struggling eurozone economy as it would make the region’s exports more expensive and further dampen down already weak inflation by making imports cheaper. “The ECB pulled out all the stops and told the market that they don’t ‘anticipate more rate cuts.’ In other words they’re done”.
Despite unconventional measures such as negative rates, central banks in Europe, Japan, the United States and elsewhere have had little luck recently in pushing up inflation.
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Investment-grade euro-denominated bonds issued by non-bank corporations established in the euro area will be included in the list of assets eligible for regular purchases under QE.
