European Central Bank chief Mario Draghi pledges indefinite stimulus to revive Eurozone

Donald Trump said his delay in hiking tariffs was 'a gesture of good will' to China as the two sides prepare for high-level talks next month

Donald Trump said his delay in hiking tariffs was 'a gesture of good will' to China as the two sides prepare for high-level talks next month

A simple rate cut would have increased the cost to commercial banks of parking their more than 1 trillion euros worth of excess reserves safely at the ECB, a risky move since banks transmit the bulk of its policy to the real economy.

EURUSD jumps then slumps below 1.1000 post-release.

That followed a decision by the European Central Bank to cut its main rate to minus 0.5% and buy 20 billion euros ($22 billion) of bonds a month.

The central bank will buy EUR20 billion of bonds per month "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".

Draghi, ECB president, said: "These risks mainly pertain to the prolonged presence of uncertainties related to geopolitical factors, the rising threat of protectionism, and vulnerabilities in emerging markets".

Sources told Reuters the BOJ is leaning towards standing pat next week if markets are calm, but is brainstorming ways to deepen negative interest rates at minimal cost.

The ECB also eased the terms of its long-term loan facility to banks and said it would introduce a multi-tier deposit rate facility to help them.

"The Governing Council now expects the key European Central Bank interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics", the European Central Bank said in its statement. Euro-area GDP grew 0.2% in the second quarter.

The Australian dollar, meanwhile, was steady at 68.6 USA cents. While the European Central Bank has a target for inflation of below, but close to, 2% over the medium term, inflation has remained muted amid weaker economic growth. "President Trump tweeted: "[The ECB] is trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting US exports". But will it be enough to revive the eurozone's embattled banks and inflation prospects? Council members including Jens Weidmann and Klaas Knot, central bank governors for Germany and the Netherlands, respectively, came out against the move.

With Lagarde taking over on November 1, some also argued that the ECB should refrain from making long-term commitments that would tie the hands of the bank's next president.

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