Jul 25, 2019

ECB opens door to first interest rate cut since 2016

ECB president Mario Draghi at a press conference earlier this year.
Photo: Arne Dedert/Picture Alliance via Getty Images

The European Central Bank left its key interest rate at -0.4%, but sent strong signals on Thursday that its record low interest rate could be heading lower as soon as September. It also hinted that it could restart the huge asset-buying program it ended in December to boost the eurozone economy.

Why it matters: The ECB is the latest central bank to hint that lower rates are imminent in an effort to stave off a global slowdown and ramp up below-target inflation. In the meantime, ECB president Mario Draghi looks as if he will end his term in October the way he started: with quantitative easing.

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Central banking's brave new world

Illustration: Aïda Amer/Axios

The European Central Bank is leading the charge in the next wave of central bank stimulus measures, but experts and former central bankers argue it will be insufficient to deal with the looming global downturn.

Why it matters: Central banks see that the global economy is in trouble and they are stepping in to act, but are responding to new problems with old solutions. The eurozone already has negative interest rates and the ECB already has spent trillions buying bonds in an attempt to stimulate the economy. In spite of these efforts, major European economies have been unable to generate inflation or growth that's even close to their targets for years.

Go deeperArrowAug 16, 2019

More negative interest rates won't save Europe

Illustration: Aïda Amer/Axios

The hope for interest rate cuts and more quantitative easing in September was not enough to placate the market on Thursday as stocks fell in the U.S. and Europe after an announcement from ECB President Mario Draghi that gave the distinct impression the central bank would ease monetary policy at its next meeting.

The state of play: Most analysts said the reaction from the market was due to Draghi sounding more hawkish than expected, but investors may simply be waking up to the idea that central bank easing isn't what it once was, and the ECB's policy tool kit looks exhausted.

Go deeperArrowJul 26, 2019

The ECB likes inflation now

Illustration: Sarah Grillo/Axios

The European Central Bank [ECB] is the oldest inflation target in the world, and certainly the one that carries the most political baggage. This week, with very little fanfare, it changed dramatically.

Background: Germany's Bundesbank implemented an inflation target in 1975 — a full 15 years before New Zealand's target was formally adopted. Germany's target started at 4.5%, but it rapidly fell to 2% in 1987, and was never subsequently changed.

Go deeperArrowJul 28, 2019