An exchange traded fund pegged to the euro’s movements versus the U.S. dollar fell nearly 2% Thursday after the European Central Bank slashed a key interest rate to a record low.
The ECB cut the main refinancing rate by a quarter point to 0.75% and also lowered the overnight deposit rate to zero.
“The benchmark rate doesn’t really matter at the moment, but cutting the deposit rate all the way to zero takes the ECB into new territory,” said James Nixon, chief European economist at Societe Generale, in a Bloomberg News report. “If you can kick-start the money market you go a long way to addressing some of the funding problems that banks face. That may free banks to lend to the economy.”
Other central banks announced easing measures Thursday.
The Bank of England said it would buy more bonds in an effort to stimulate the economy. Also, China’s central bank cut interest rates.
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