Trying to salvage a weak recovery, the European Central Bank on Thursday cut interest rates and announced a new economic stimulus programme that involves buying financial assets.
The chief monetary authority for the 18 countries that use the euro cut its benchmark interest rate from 0.15 to 0.05 per cent, a new record low. The step reduces the costs banks pay when they borrow from the ECB. Lower rates stimulate more lending and growth.
But companies are finding credit hard to get even with low rates. So the ECB turned to more drastic measures and also announced a program to buy private-sector bonds.
The aim is to make credit cheaper and easier to get, helping investment and growth at a time when the economy of the 18-country euro zone has stalled.
S&P 500, Dow scale new highs on upbeat US data, ECB moves
NEW YORK: US stocks climbed on Thursday after the European Central Bank cut interest rates and announced a new plan to stimulate the euro zone economy, and as a flurry of data pointed to a steadily improving US economy.
Both the Dow and S&P 500 touched record intra-day highs after the ECB’s surprise move, with the benchmark index hitting a high of 2,011.17.
Investors had hoped for decisive action from the ECB to thwart deflation and spur stagnating growth in the euro zone.
The Dow Jones industrial average rose 39.85 points to 17,118.13. The S&P 500 was up 5.18 points to 2,005.9. The Nasdaq Composite added 15.19 points to 4,587.75. Data showed US initial jobless claims rose to 3,02,000 last week, within levels consistent with a strengthening labour market, while US firms hired fewer workers than expected in August, according to the private ADP survey. Reuters