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ECB cuts eurozone rates and launches stimulus programme ECB cuts eurozone rates and launches stimulus programme
(35 minutes later)
The European Central Bank has cut its benchmark interest rate to 0.05%, and introduced new stimulus measures.The European Central Bank has cut its benchmark interest rate to 0.05%, and introduced new stimulus measures.
The ECB had earlier cut its rate from 0.25% to 0.15% in June, and also became the first major central bank to introduce negative interest rates.The ECB had earlier cut its rate from 0.25% to 0.15% in June, and also became the first major central bank to introduce negative interest rates.
ECB President Mario Draghi also said the bank would launch an asset-backed securities purchase programme. It will also launch an asset purchase programme, which will buy debt products from banks.
It is hoped this move will add liquidity to the financial system and revive lending.
The move falls short of a programme of buying government bonds - a process known as quantitative easing, and one which the US Federal Reserve has undertaken.
'New credit flows'
Referring to the ABS purchases, Mr Draghi said: "The Eurosystem will purchase a broad portfolio of simple and transparent asset-backed securities with underlying assets consisting of claims against the euro area non-financial private sector under an ABS purchase programme.
"This reflects the role of the ABS market in facilitating new credit flows to the economy and follows the intensification of preparatory work on this matter."
After the latest news was announced the euro fell to a one-year low against the dollar of $1.3011.After the latest news was announced the euro fell to a one-year low against the dollar of $1.3011.
The ECB has been under pressure to kick-start the eurozone economy, as manufacturing output has slowed and inflation has fallen to just 0.3%.The ECB has been under pressure to kick-start the eurozone economy, as manufacturing output has slowed and inflation has fallen to just 0.3%.
Mr Draghi had said after the ECB's last rate cut in June that "for all the practical purposes, we have reached the lower bound".Mr Draghi had said after the ECB's last rate cut in June that "for all the practical purposes, we have reached the lower bound".
'Significant'
The new cut may be accompanied later by further stimulus measures to boost the economy.
The benchmark refinancing rate determines what banks pay the ECB for credit, and affects what banks charge companies to borrow.The benchmark refinancing rate determines what banks pay the ECB for credit, and affects what banks charge companies to borrow.
The central bank also cut its deposit rate, what banks pay to keep their money at the central bank, to minus 0.2% from minus 0.1%.The central bank also cut its deposit rate, what banks pay to keep their money at the central bank, to minus 0.2% from minus 0.1%.
It is hoped that this measure will encourage banks to lend to business, rather than sit on their cash.It is hoped that this measure will encourage banks to lend to business, rather than sit on their cash.
A news conference by Mr Draghi later may give more indicators about what else the bank might do. "The cut to the deposit rate is significant and should further weaken the euro," said Aberdeen Asset Management Investment Manager Luke Bartholomew.
He has indicated that the bank may buy large quantities of bonds if needed - known as quantitative easing.
"The cut to the deposit rate is significant and should further weaken the euro," said Aberdeen Asset Management Investment Manager Luke Bartholomew