Reply #9: ECB Cuts Key Rate to 1%, May Dig Into Toolbox

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http://www.bloomberg.com/news/2011-12-08/ecb-cuts-key-rate-to-1-may-dig-into-toolbox.html

The European Central Bank cut interest rates for a second straight month and may delve even deeper into its toolbox today to stimulate bank lending and fight off a recession.

ECB policy makers meeting in Frankfurt lowered the benchmark interest rate by a quarter percentage point to 1 percent to match a record low, as expected by 55 of 58 economists in a Bloomberg News survey. They may also loosen collateral criteria to give banks greater access to cheap cash and offer longer-term loans, said three euro-area officials with knowledge of the deliberations. ECB President Mario Draghi holds a press conference at 2:30 p.m.

“They will have listened to the banks and will start some measures to alleviate some of the strains in markets,” said Christoph Rieger, head of fixed income strategy at Commerzbank AG in Frankfurt. “They will also keep open the option to go below 1 percent on rates, that’s no longer the magic floor.”

The ECB is focusing on getting banks lending again rather than increasing its government bond purchases to fight the debt crisis. Later today, Europe’s leaders will convene in Brussels for talks to frame the fifth “comprehensive” solution in 19 months to the turmoil, which has left Germany and France facing the threat of losing their AAA rating from Standard & Poor’s.