By David McHugh, Huffington Post – July 5, 2012
FRANKFURT, Germany — The European Central Bank cut its benchmark interest rate to a record low Thursday to spark economic growth but gave little sign it would take further action soon to ease Europe’s financial crisis.
By cutting its key refinancing rate by a quarter percentage point to 0.75, a move that was widely expected, the ECB sought to give Europe’s sagging economy a lift by making it cheaper for businesses and consumers to borrow.
Financial markets were underwhelmed, though, and even ECB President Mario Draghi conceded during a press conference that the impact of the rate cut could be “muted” given the low demand for credit in the slow economy. Analysts noted that interest rates were already low, that banks remain wary of lending to each other and that businesses and consumers see little reason to take on more debt.
In a more surprising move, the ECB also cut the interest rate it pays banks on overnight deposits by a quarter percentage point – to zero. The move could nudge banks to lend more money, rather than sock it away with the ECB and earn no interest.… Read the rest