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Agence France-Presse

The European Central Bank brought out the heavy artillery last night to jump-start the stalled euro-zone economy, slashing ­already record-low interest rates, pumping massive new sums into the banking system and, for the first time, buying corporate bonds.
The unprecedented scale of the ECB’s action took financial markets by surprise, sparking a dramatic rise in euro-zone stock markets and sending the euro lower against the US dollar.
“The central bank came out all guns blazing, cutting rates across the board and increasing both the size of the quantitative easing ­programme and the list of eligible assets,” said Craig Erlam, senior market analyst at Oanda.
The ECB said it was cutting its central refinancing rate to 0 per cent from 0.05 per cent.
The rate on its marginal lending facility is going down to 0.25 per cent from 0.30 per cent and on the deposit facility to minus 0.40 per cent from minus 0.30 per cent.
ECB chief Mario Draghi hinted that interest rates could fall even lower if area-wide inflation did not pick up soon.
READ MORE: European Central Bank keeps its options open ahead of US rate decision
“The governing council ­expects the key ECB interest rates to remain at present or lower levels for an extended period of time,” Draghi said.
The ECB also announced it would expand the volume of bonds it purchased each month under its programme of quantitative easing to €80 billion (HK$680 billion) from €60 billion.
And it would also start buying corporate bonds under the QE programme.
Finally, the central bank said it would roll out another new, large cheap-loan facility for banks, called TLTRO, to help pump ­liquidity into the financial system.
The raft of new measures were more than analysts had been ­expecting.
READ MORE: G20 finance minsters and central bankers move to ease fears about currency volatility and market turmoil
“Following the adverse reaction” to previous measures in December, “and in light of the growing downside risks to the recovery, the governing council appears to have recognised the importance of not under-delivering again,” said Capital Economics economist Jonathan Loynes.
Moves announced by the ECB back in December had been ­perceived by the financial markets to be half-hearted.
“All told, the ECB deserves credit for learning from its mistake in December. But there is no guarantee that its latest ‘bazooka’ will be any more effective than previous ones” in securing strong and sustained enough growth to eliminate the threat of deflation in the currency union, Loynes said.
“The ECB has belatedly delivered, but it can’t work miracles,” he warned.
Berenberg Bank economist Holger Schmieding said the package of new measures “exceeds expectations by enough to have a positive confidence impact”.
In the absence of any new shock such as potential decision by Britain to leave the EU, “the package will help to get the euro one back to trend growth of annualised rates around 1.6 per cent by mid-2016”, Schmieding said.


ECB delivers another adrenaline shot to eurozone economy