The European Central Bank ventured into uncharted territory Thursday with a raft of unusual measures meant to revive the eurozone economy by getting credit flowing to companies and preventing a debilitating bout of deflation.
The ECB was spurred into action by evidence that growth in the 18-country eurozone is too weak to keep consumer price inflation at a healthy level. The fear is the low inflation will last or, worse still, become an outright drop in prices that, if sustained, can snuff out what little growth Europe has.
Expectations were high for the central bank to show it would finally act to prevent such a scenario after months of hesitation in which the inflation rate kept falling. The last measure, for May, showed inflation was only 0.5 per cent, far below the bank’s goal of 2 per cent.
The ECB’s 24-member governing council finally struck on Thursday, announcing a package of measures that included interest rate cuts, including lowering one rate into negative territory for the first time. On top of that, it promised billions in cheap loans for banks on condition they lend more, and announced a new program to use financial markets to round up more cash for companies.
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