The Governing Council of the ECB, meeting today in Frankfurt, therefore decided to cut the reference rate by a quarter of a point to 0,25% from the previous 0,50% in force since May. This is a new all-time low for Eurozone rates since the launch of the euro. The new rate cut was not expected by the majority of analysts and was favored by the drop in the inflation rate in the euro area to 0,7% in October, a new low for almost four years, from 11% in September.
As announced by the ECB, the rate on marginal lending is also cut by a quarter of a point to 0,75% while the rate on overnight deposits of banks with the ECB is confirmed at zero. The decision of the institute led by Mario Draghi was immediately appreciated by the markets: an immediate flare-up on the stock exchanges, while the euro collapsed to 1,337 from 1,35 this morning. Milan, which used to lose 0,7% at lunchtime, is now gaining 0,9% while Paris and Frankfurt are recovering over 1%.
