ECB Cuts Rates to Record Low Level; Draghi Says Risks Remain

The European Central Bank cut their benchmark interest rates to a record low on Thursday. In addition, the bank cut rates it pays on overnight deposits left at the ECB to 0%.

The ECB announced Friday morning that its main refinancing rate was being reduced to 0.75% from 1.0%.

According to Bloomberg, the move had been widely expected as 76% of economists it surveyed had predicted the ECB would cut rates to a record low.

Recall that unlike the Federal Reserve in the United States, the ECB has but one official mandate – to control inflation. As such, ECB President Mario Draghi has been reluctant to intervene in the European debt crisis over the past three months (the ECB bond-buying program has been dormant for more than 15 weeks) or to cut rates.

At his press conference in Frankfurt, Draghi said further downside risks to euro-area growth have materialized and indications for the second quarter point to weakened growth and heightened uncertainty.

"Risks surrounding the euro area continue to be on the downside,” Draghi told the press.

On the inflation front, the ECB President said that inflationary pressure has been dampened by the risks to growth.

Draghi told reporters, "Beyond the short term, we expect the euro-area economy to recover gradually but see momentum dampened by number of factors."

The factors Draghi mentioned include stress in some sovereign-debt markets (presumably Spain and Italy) and high unemployment, both of which will weigh on underlying growth momentum, he said.

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Other stories on Europe to review:

• Bank of England Launches 3rd Round of QE
  
• European PMI's Show Some Improvement
  
• EU Leaders Announce Measures To Ease Crisis
  
• Greece Has Formed a Government
  
• Eurozone ZEW Index Continues to Decline
  
• German ZEW Index Slides in June
  
• Greek Voters Support Euro and Bailout
  
• Spain Downgraded at Moody's
  
• Eurozone Industrial Production Declines
  
• Spanish Banks To Get 100 Billion Bailout
  
• ECB Leaves Rates Unchanged; Keeps Hope for Action Alive
  
• Germany's Industrial Production Falls

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