http://www.bloomberg.com/news/2014-06-05/draghi-takes-ecb-deposit-rate-negative-in-historic-move.html
The European Central Bank cut its deposit rate below zero and said it would announce further measures later today as policy makers try to counter the prospect of deflation in the world’s second-largest economy.
ECB President Mario Draghi reduced the deposit rate to minus 0.10 percent from zero, making the institution the world’s first major central bank to use a negative rate. Policy makers also lowered the benchmark rate to 0.15 percent from 0.25 percent. Draghi will hold a press conference at 2:30 p.m. in Frankfurt.
“They have to do something to address weak inflation,” Nick Matthews, senior economist at Nomura International Plc in London, said before the decision. “Investors are expecting them to keep alive the option of more unconventional measures like quantitative easing.”
Draghi has said a worsening in the medium-term outlook for prices would justify broad-based asset purchases, and with inflation stuck well below the ECB’s goal for the past eight months and revised staff forecasts due today, that’s a scenario that remains possible. While he’s unlikely to announce a QE program immediately, he may keep the option alive by providing insight into how a plan could overcome the practical challenges it faces in an 18-nation currency union.
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