Why the ECB rate cut will achieve precious little

(Source: Reuters)

As the European Central Bank has cut rates to 0.5 per cent, a historic low, there is little confidence that this will achieve much.

Dr Howard Archer of IHS Global Insight:

The ECB has certainly taken its time to take interest rates down to 0.50% given that they have been held at 0.75% since July 2012.

Admittedly, it is unlikely that the trimming of interest rates from 0.75% to 0.50% will have a major growth impact, especially given fragmented credit markets.

Jennifer McKeown of Capital Economics:

Note that the deposit rate was left at zero. The cut in the refi rate will marginally help those peripheral banks borrowing from the ECB, but won’t address the disparity in interest rates facing firms and households in different countries or the credit constraints still facing SMEs.

Worse still, constant appetite for monetary action has shifted attention from more fundamental reforms that the Eurozone needs. Attention will now be on the press conference at 13.30 to see if ECB president Mario Draghi will introduce further measures. You can watch it live here.