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March 1, 2021

ECB surprises with rate cut

The European Central Bank (ECB) unexpectedly lowered all its interest rates Thursday to fresh record lows and took its rate on bank deposits further into negative territory, in an effort to keep ultralow inflation rates from undermining the eurozone’s fragile recovery. Analysts, quoted by wsj.com, say, however, that it is still an open question as to what additional measures the ECB might still announce, or whether the rate cut is a way for the central bank to show that it is doing something now before taking on bigger decisions later. The ECB’s main lending rate was lowered to 0.05 percent from 0.15 percent. The ECB also lowered the rate on overnight bank funds parked at the central bank to -0.2 percent from -0.1 percent. The ECB in June became the largest central bank to experiment with a negative rate on bank deposits, a measure aimed at encouraging banks to lend surplus funds to other financial institutions rather than parking them at the ECB. It also cut the rate it charges on overnight loans to 0.30 percent from 0.40 percent.

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