The bank also extended a promise to keep rates at record lows for as long as necessary. "We think it will have to deliver at least two more 10bps rate cuts in December and March, as well as to augment the pace of QE to €40bn/month in March once the global macro environment worsens further", analysts at TD Securities argued.
The European Central Bank has just announced a sweeping round of stimulus for the continent's slowing economy cutting interest rates to their lowest ever level, as well as a round of quantitative easing. This is welcome news for banks, who say negative rates have hurt their bottom line.
"Today's decisions have anchored and enshrined the Draghi legacy in future European Central Bank decisions", ING economist Carsten Brzeski said.
In fact, with an interest rate of -0.5%, the Euro will continue to struggle against most currencies although it is possible that perhaps some of the selling will update right around this big figure and cause a bit of a bounce.
The move marks the first time the deposit rate has changed since 2016, as Europe's economy has struggled amidst losses in demand both from Brexit and the trade war, while quantitative easing was last used in December of previous year.
Thursday's decision sent the euro below 1.06 versus the USA dollar, where it is on track to close at its lowest level since May 2017. "They get paid to borrow money, while we are paying interest!"
The ECB cut its deposit rate by 10 basis points to a record low of -0.5 per cent, promised that rates would stay low for longer and said it would restart bond purchases at a rate of €20-billion a month from November 1.
While conservative European Central Bank policymakers had spoken out against more bond purchases in recent weeks, the decision suggests some of them eventually agreed, giving Draghi a majority for what is probably his last major policy move.
The ECB's decision triggered a rally in euro zone bonds that will cut the cost of borrowing across the 19 countries that use the euro.
Longer-term, the 61.8% Fibonacci retracement level has been broken and typically that means that we go down to the 100% Fibonacci retracement level given enough time. -China trade deal or seal a Brexit agreement.
Draghi has called for years for governments to do more to stimulate growth.
The Federal Reserve is due to meet next week. "Deeply negative interest rates could push up saving rates - see the surge in German savings, for instance", Shweta Singh, a managing director at TS Lombard, said.