The European Central Bank promised an indefinite supply of fresh asset purchases and cut interest rates deeper into negative territory on Thursday, an effort to prop up the ailing euro zone economy that was cheered by financial markets.
Coming in the final weeks of ECB President Mario Draghi’s mandate, the moves will increase pressure on the U.S. Federal Reserve and Bank of Japan to ease next week to support a world economy increasingly characterised by low growth and protectionist threats to free trade.
Yet there were immediate doubts as to whether the ECB measures — the few remaining in its monetary policy arsenal — would be enough to boost a euro zone recovery in the face of a U.S.-China trade war and possible disruption from Brexit.
The ECB cut its deposit rate by 10 basis points to a record low of -0.5%, promised that rates would stay low for longer and said it would restart bond purchases at a rate of €20 billion a month from November 1.
“The Governing Council expects [bond purchases] to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates,” it said.
Given that markets do not expect rates to rise for nearly a decade, such a formulation suggests that purchases could go on for years — an eventuality Mr. Draghi did not challenge.
