ECB Cuts Rates, Launches Sweeping Stimulus Package; Trump Reacts

The European Central Bank cut its key interest rate and adopted a sweeping package of bond purchases, committing the bank to a yearslong ultraloose monetary policy and jolting European financial markets. U.S. President Trump reacted negatively.

ECB President Mario Draghi made the announcement Thursday to address the growing instability in the European economy. It would first cut in interest rates from a negative 0.4% to minus 0.5%. The goal is to encourage banks to offer more loans to businesses and individuals to provide a fresh boost to Europe’s economy.

The ECB will also start buying €20 billion in bonds every month, starting in November as part of a quantitative easing program. It will also encourage more lending along with increasing the overall money supply for eurozone countries.

“In view of the weakening economic outlook and the continued prominence of downside risk, governments with fiscal space should act in an effective and timely manner,” Draghi said during the Thursday press conference.

Draghi and the ECB’s decision come at a time when Europe’s economy has seen growing instability. Inflation has begun to fall, the continent is feeling the effects of the trade war between China and the U.S., and Germany, Europe’s largest economy, has been teetering on recession.

The news garnered immediate criticism from President Donald Trump.

The stimulus package is also expected to be the final action by the outgoing Draghi, whose term ends Nov. 1. Christine Lagarde, former head of the International Monetary Fund, will step in as the new ECB president and has already indicated more stimulus packages will be on the way.