The European Central Bank’s main interest rate has been cut from 0.05% to 0% as part of a package of measures intended to revive the eurozone economy.
The ECB will also expand its quantitative easing program from €60 billion to €80 billion a month.
The bank also decided to further cut its bank deposit rate, from minus 0.3% to minus 0.4%.
The measures, including the decision to cut the main interest rate, were more radical than investors had expected.
The stimulus measures announced three months ago have largely failed to drive economic growth higher or boost inflation.
ECB president Mario Draghi told a news conference in Frankfurt that it had cut eurozone inflation projections to reflect the recent decline in oil prices.
The bank now expected inflation to be just 0.1% this year – substantially lower than the previous estimate of 1% and underlining the need for the bank to go further than expected.
Inflation should rise to 1.3% in 2017 and 1.6% the following year, according to its estimates.
“We are not in deflation,” Mario Draghi stressed.
He also warned that risks to economic growth across the 19 countries that use the euro remained “tilted to the downside”.
The ECB cut its growth forecasts to an increase of 1.4% in 2016 – down from 1.7%; 1.7% for 2017 – down from 1.9%; and 1.8% for 2018.
The governing council expected the bank’s key interest rates “to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases”.
The bond-buying program will continue at least until the end of March 2017.
As well as government debt, the ECB will now be allowed to use its newly printed money to buy bonds issued by companies as well. That scheme will start towards the end of the second quarter this year.
The euro initially fell 1% against the US dollar, but soon recovered to be trading higher and was also up against the yen. A weaker euro makes European exports cheaper, so the rise will not be welcomed by manufacturers.
European stock markets also rose sharply following the announcement before losing much of those gains, with Frankfurt up 0.6% and Paris rising 1%, although the FTSE 100 in London fell 0.2% and Wall Street was flat in morning trading.
Shares in European banks posted gains, with Deutsche Bank rising 4.8%, Societe Generale adding 2.7%, Santander up 5.5% and Italy’s UniCredit adding 6.8%.
Eurozone unemployment rate fell for a third consecutive month in January, dropping to its lowest rate since August 2011.
The jobless rate in the 19-country eurozone declined to 10.3% in January from 10.4% in December, according to Eurostat’s latest figures.
The number of people unemployed in the eurozone fell by 105,000 to 16.65 million.
The eurozone’s jobless rate hit a high of 12.1% during the first half of 2013.
In the 28 member European Union the unemployment rate fell to 8.9%. That was down from 9% in December and the lowest rate recorded since May 2009.
The lowest unemployment rate in the eurozone was in Germany at 4.3%, while the highest rates were in Spain, at 20.5%, and Greece, at 24.6%.
On February 29, separate figures showed that the eurozone fell back into deflation in February.
The latest inflation figures from the EU’s statistical agency estimated that consumer prices across the region were 0.2% lower last month than a year earlier.
The return of deflation is seen as increasing the likelihood that the European Central Bank (ECB) will announce more stimulus measures at its meeting next month.
Eurozone’s economy is back into deflation after the consumer prices fell sharply in February to minus 0.2%, putting more pressure on the European Central Bank (ECB).
The slide into deflation is a sharp reversal from the revised 0.3% increase recorded in January.
According to Eurostat, it is the first fall in inflation since September when it shrank by 0.1%.
Energy drove the decline, with prices down 8% in February compared to a 5.4% slide in January.
The dismal figures have dashed hopes that ECB efforts to boost prices were working. That raises the chance of the bank announcing further stimulus measures next month.
It has already announced a cut to its bank deposit rate, which remains in negative territory.
ECB chief Mario Draghi insisted earlier this month the policies were working.
Economic sentiment across the eurozone deteriorated more than expected in February, according to research by the European Commission.
The finance ministers from G20 and central bankers agreed on February 27 to use “all policy tools, monetary, fiscal and structural – individually and collectively” to renew growth.
The eurozone economy expanded by 1.5% in 2015, the statistics agency Eurostat has announced.
In Q4 of 2015, the 19 countries that use the euro grew 0.3%, compared with the previous three months, Eurostat has said.
The 28 countries of the EU also grew 0.3% in Q4, to a GDP growth rate of 1.8% for the full year.
Growth slowed during 2015, suggesting that more action may be needed to stimulate economies from the European Central Bank (ECB).
Eurostat also announced on February 12 that industrial production had fallen 1% in December compared with the previous month, both for the eurozone and the EU.
Year on year, it fell 1.3% in the eurozone and 0.8% in the EU.
The biggest contraction in GDP came in Greece, where the economy shrank 0.6% in Q4 of 2015, which was better than had been expected.
However, the contraction in Q3 turned out to have been bigger than previously thought, being revised from 0.9% to 1.4%.
Germany’s economy expanded by 0.3% in Q4 of 2015 to an annual rate of 1.7%.
The German statistics agency said that government spending was “markedly up”, while household consumption rose slightly.
The figures follow surprisingly poor industrial production data for December 2015.
Eurozone’s economic growth slowed to 0.3% in Q3 of 2015, latest figures have shown.
The rate was lower than expected, and compared with a pace of 0.4% recorded in the previous quarter.
The pace of expansion in Germany, the eurozone’s largest economy, slowed, but France returned to growth.
The European Central Bank (ECB) is widely expected in December to expand its stimulus program, which aims to lift inflation and support growth.
Germany’s economy grew by 0.3% in Q3, down from 0.4% in the previous quarter.
The economy had shown “continued moderate growth”, helped by increased domestic consumption, Germany’s Federal Statistics Office said.
However, foreign trade “had a downward effect on growth, because the increase in imports was markedly larger than that of exports”, it added.
The French economy also grew by 0.3% in the same period, but this marked a pick-up from zero growth previously.
The French statistics agency INSEE said a rise in imports had also weighed on the country’s growth rate.
France’s economy saw an increase in household spending, and that production of goods and services picked up, the INSEE added.
“The [GDP] figure… confirms that we have left in 2015 the period of very weak growth that France had experienced since 2011,” said French Finance Minister Michel Sapin.
Among the other major eurozone economies, the growth rate in Italy slowed to 0.2%, which was worse than expected, while the Spanish economy grew by 0.8%.
Portugal’s economy recorded zero growth despite having expanded by 0.5% in the second quarter. Greece’s economy contracted by 0.5%, while Finland’s shrank by 0.6%.
The Eurostat figures showed the eurozone’s economy grew by 1.6% in Q3 compared with a year earlier.
Expectations are growing that the ECB will expand its monetary stimulus program at its meeting next month.
In October, the ECB said it would “re-examine” the policy, and on November 12, ECB president Mario Draghi said the bank was ready to extend its policy if needed.
In January 2015, the ECB started a quantitative easing (QE) stimulus program worth at least €1.1 trillion in an attempt to avoid deflation and boost growth in the eurozone.
The bank has committed to buy €60 billion of bonds a month until September 2016.
The most recent figures showed inflation in the eurozone returned to zero in October from September’s -0.1%.
Eurozone countries returned to deflation in September 2015 as prices fell at an annual rate of 0.1%, according to the Eurostate statistics agency.
It is the first time inflation had turned negative for six months, with an 8.9% fall in the price of energy largely responsible for the decline.
Core inflation in the countries that use the euro – which strips out energy and food prices – showed a 0.9% rise, the same as August.
The Eurostat statistics agency also said the eurozone’s unemployment rate for August was unchanged at 11%.
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Mario Draghi, the president of the European Central Bank (ECB), warned earlier this month that inflation could turn negative.
The ECB expects inflation to be 0.1% in 2015 as a whole, rising to 1.5% in 2016 and 1.7% in 2017.
The bank is spending €60 billion on asset purchases, under its program known as Quantitative Easing (QE), every month for the next year in an attempt to boost prices.
However, the latest figures increase pressure on the bank to increase the spending or carry it beyond September 2016.
Eurozone unemployment fell in July 2015 to its lowest rate in more than three years, Eurostat figures have shown.
According to the EU statistics agency, the unemployment rate in the currency union fell to 10.9% in July from 11.1% the month before.
The fall was helped by a sharp fall in Italy’s unemployment, where the jobless total fell by 143,000.
It is the first time the unemployment rate in the eurozone has been below 11% since February 2012.
The wider 28-member EU saw the unemployment rate fall to 9.5%, the lowest rate since June 2011.
The lowest unemployment rate was in Germany, at 4.7%. Greece had the highest unemployment rate, at 25%, the latest available data from May showed, followed by Spain at 22.2%.
The rate of youth unemployment across the eurozone also declined to 21.9% in July from 22.3% a month earlier.
A survey released earlier on September 1 suggested that growth in the eurozone’s manufacturing sector had eased slightly in August, despite factories barely raising prices.
The closely-watched Markit eurozone manufacturing purchasing managers’ index (PMI) was 52.3 last month, below a preliminary reading that suggested it had held steady at July’s reading of 52.4. However, it has remained above the 50 mark that separates growth from contraction for more than two years.
There was some good news within the data. Germany, the Netherlands, Ireland and Italy all saw strong growth, with Germany’s manufacturing PMI reading jumping to 53.3 in August from 51.8 a month earlier.
The manufacturing figures come almost six months into the European Central Bank’s (ECB) €60 billion-a-month bond-buying program designed to inject new life into the eurozone economy and combat low inflation, which is currently sitting at 0.2%.
With inflation still far from the ECB’s target rate of just below 2%, and looking likely to stay there for the foreseeable future, speculation is growing the bank will have to extend its stimulus program beyond the planned completion in September 2016.
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