European Central Bank President Mario Draghi on Thursday did not rule out further easing in euro area interest rates in future after the bank cut the main refinancing rate to a record low in the backdrop of increasing weakness in the economy. He also hinted at the prospect of negative deposit rates.
"Our monetary policy stance will remain accommodative for as long as needed," Draghi said in his introductory statement at the post-decision press conference. He reiterated that the bank "stands ready to act" when needed.
Earlier today, the Governing Council reduced the main refinancing rate by 25 basis points to a record low 0.50 percent at its meeting in the Slovak capital Bratislava.
The latest reduction was the first in ten months. The bank also lowered the marginal lending facility rate to 1 percent from 1.50 percent. The deposit rate, which is already at zero, was left unchanged.
"The cut in interest rates should contribute to support prospects for a recovery later in the year," Draghi said. "These decisions are consistent with low underlying price pressure over the medium term."
Answering questions from the press, Draghi revealed that today's decision to cut interest rates was not unanimous. "There was a very, very strong consensus towards an interest rate cut," he said. "Within that consensus there was a prevailing consensus towards 25 basis points."
Leaving the door open for more policy easing, he also said the bank is "technically ready" for negative deposit rates. While saying that the bank has an "open mind" towards such a move, he also drew attention to the adverse consequences of it.
The euro fell against the dollar following Draghi's comments on negative interest rates, which implies banks may have to pay for parking cash with the ECB.
Inflation expectations remain firmly anchored in line with the ECB's target of rates 'below, but close to, 2 percent', he said. Monetary and loan dynamics remain subdued and weak economic sentiment has extended into spring of this year, he added. He also pointed out that labor market conditions in the euro area remain weak.
However, the bank expects euro area export growth to benefit from a recovery in global demand and, the economic activity to stabilize and recover gradually in the second half of the year. The risks surrounding the economic outlook for the euro area continue to be on the downside, Draghi said. Inflation risks are seen as broadly balanced.
'We will monitor very closely all incoming information on economic and monetary developments and assess any impact on the outlook for price stability," the central bank chief said.
Draghi also announced that the bank will continue the main refinancing operations as fixed rate tender procedures with full allotment for as long as necessary, and at least until mid-2014. The ECB lends unlimited funds to banks under this facility. The bank will also conduct the 3-month longer-term refinancing operations to be allotted until the end of the second quarter of 2014.
Further, Draghi said the Governing Council decided to start talks with other European institutions on initiatives to promote a functioning market for asset-backed securities collateralized by loans to non-financial corporations. Meanwhile, the ECB chief also said it was essential for governments to intensify the implementation of structural reforms at national level, building on progress made in fiscal consolidation and proceeding with bank recapitalization where needed.
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May 01, 2026 15:54 ET Central banks dominated the economics news flow this week with almost all major ones announcing their latest policy decisions and many boosted expectations for a rate hike in June. In other news, several countries released the preliminary data for first quarter economic growth. In the U.S., comments by Fed Chair Jerome Powell were also in focus as his term ends this month.