Mario Draghi unexpectedly cut the cost of money from 0,5% to 0,25%. Moreover, with today's decision, Draghi said, the ECB has not reached the minimum threshold for interest rates and in principle can decide on a further cut in the cost of money. The ECB thus reiterated that monetary policy will remain accommodating in the future as well and that the ECB is ready to evaluate all the tools available. Furthermore, the fixed-rate procedure with unlimited volume, Ltro, for ECB refinancing auctions was extended until the beginning of July 2015. The ECB said it was ready to consider all the tools available to support the Eurozone.
The cut is in line with the forward guidance announced last July and was also motivated by the trend in inflation, which fell more than expected in October. In any case, the ECB does not see a deflationary scenario but estimates a possible "prolonged period of low inflation" for the Eurozone. In any case, Draghi reassured that there is no risk for the Eurozone of the Japan syndrome, or of deflation and low or low growth.
For Draghi, the recovery continues but is fragile and uneven, unemployment is stabilizing but is still at high levels. The indicators point to modest growth in the second half. The decision to cut rates was not taken unanimously, but with a "significant majority". The ECB board, Draghi explained, was not divided on the rate cut but only on the timing: everyone agreed that it had to be done.
Finally, the board also discussed the possibility of cutting the deposit rate, which is now at zero and thus bringing it to negative, to push the banks to use the liquidity parked in Frankfurt. Furthermore, it is necessary to strengthen the banks and reduce the fragmentation of the credit market.
