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European Central Bank cuts 2 interest rates to rescue eurozone from dangers of deflation

June 04 2014 09:50 PM

CP28640115 — The president of the European Central Bank Mario Draghi speaks during a news conference in Frankfurt, Germany, Thursday, June 5, 2014. The European Central Bank has cut two key interest rates, one of them into negative territory — a highly unusual step that underlines the urgency of its efforts to keep the eurozone economy from sliding into crippling deflation. It reduced its main interest rate, the refinancing rate, from a record low of 0.25 percent to 0.15 percent. More drastically, it also cut the rate it pays on money deposited by banks from zero to minus 0.1 percent, an unprecedented step for the ECB that aims to push banks to lend money rather than hoard it. (AP Photo/Michael Probst)

Original Publication Date: June 4, 2014 9:50PM

Publication Updated: January 8, 2025 11:01PM

FRANKFURT – The European Central bank has cut two key interest rates in an attempt to keep the eurozone economy from falling into deflation.

The monetary authority for the 18-country eurozone reduced its benchmark refinancing rate Thursday from a record low of 0.25 per cent to 0.15 per cent.

More drastically, it cut the rate it pays on money deposited by banks from zero to minus 0.1 per cent.

Charging banks for parking funds with the ECB is an unusual step aimed at pushing banks to lend that money rather than hoard it.

The ECB moves are aimed at spurring the weak recovery and raising inflation that’s dangerously low at 0.5 per cent. Low inflation has raised fears the 18 countries that use the euro may slide into outright deflation, a crippling downward price spiral.

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