Euro Interest Rate Cut to Record Low 0.50%

In an attempt to escape the euro zone’s longest recession in over 40 years, the ECB make a bold move, cutting interest rates to 0.50% from a previous standing of 0.75%.

It is the first time in 10 months that the ECB has cut rates. The rates cuts will go into effect on May 8th.

If this rate cut doesn’t bring about positive results in the Euro Zone, the ECB may feel like they are backed in a corner. Lowering their interest rates from here would likely bring them to 0.25% and from there, there is not much else they can do as far as interest rates are concerned.

The ECB will likely talk about the rate cut today at their ECB PRess Conference starting at 8:30am EST (New York Time)

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  • Hi Fabrice!

    This is Chris but I hope you do not mind if I share my 2 cents on this matter?

    In my opinion the Euro Zone (EZ) need to change their course and start to decrease the emphasis on decreasing the government budget deficits.

    The most important goal of the EZ is too boost demand,create access to credit lines for businesses as usual, foster competition, invest in R&D, invest in training’s (retraining unemployed).

    Believe me, I am an advocate of balanced budgets. For all my life. I am very pro balanced budget person. And people who know could be very surprised to see me say that now is not the time. The more the EZ cut on budgets, the more the economies are going to contract, the tougher it actually it is to pay back debt, the higher the interest rate becomes. Its a vicious circle. In that regard Eurobonds is often mentioned as a method to share the debt burdens.

    Once the economy starts showing signs of life, then we can slowly work on paying back the debt. What do you think?

  • Fabrice Goeyvaerts

    Hi Tony,

    Tks for the constant updates on Fundamental News … you are my Forex Factory 😉

    Living in France I feel pretty concerned about that decision.

    I was wondering if a country (or zone) could consider going lower than 0% interest and so using negative interest rate. Does that make sense ? Has it happened in the past ?

    If not, in the case of Euro Zone what else could they do to stimulate its economy ? Euro Zone being very different from Japan, I guess it wouldn’t help doing the same. So, what’s left … any idea ???

    Tks a lot for your help,