The European Central Bank has unveiled fresh stimulus measures to bolster the eurozone, including cutting a key interest rate.
The deposit facility rate, paid by banks on reserves parked at the ECB, was already negative, but has now been cut from minus 0.4% to minus 0.5%.
The ECB also said it was re-starting quantitative easing. It will buy €20bn of debt a month from 1 November.
The eurozone’s main interest rate has remained unchanged at zero.
The moves come as the ECB combats an economic slowdown. The bank said its asset purchase programme would “run for as long as necessary”, while interest rates would remain “at their present or lower levels” until eurozone inflation reached its target rate of 2%.
Quantitative easing, or QE, is a way for central banks to pump money into the financial system when interest rates are ultra-low and conventional stimulus methods no longer work.
The central bank buys assets, usually government bonds, with money it has “printed” – or, more accurately, created electronically.
Making more money available in this way is supposed to encourage financial institutions to lend more to businesses and individuals.
What is quantitative easing?
Under its previous QE programme, the ECB bought €2.6 trillion of bonds between 2015 and 2018.
