What can the ECB do now?

Christine Lagarde
Photo: IMF/Cliff Owen

After the Fed reduced rates by 50 basis points to respond to the coronavirus – its first emergency rate cut since the financial crisis – the focus is now on the European Central Bank.

But the ECB has scant room for manoeuvre. While the US federal funds rate stands now at 1–1.25%, the deposit rate in the eurozone is already at a record low -0.5%. Additionally, in September 2019, the ECB resumed asset purchases and reduced the rate at which banks can access targeted longer-term refinancing

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