The European Central Bank cut its interest rates by 0.1%
and confirmed the start of an asset-buying programme similar to
that seen by the Federal Reserve in the depths of the
While the Fed is now ending its quantitative easing programme
as the US economy recovers, the ECB is embarking on a
programme to try to stimulate lending growth.
The euro fell sharply in response, as did the US and German
bond yields, although those rebounded later.
''ECB chief Mario Draghi showed he is not above playing
tricks, which is as it should be given the magician he is,''
Westpac currency strategist Imre Speizer said.
In June, Mr Draghi said interest rates had reached the lower
bound, for all practical circumstances - excluding some
In September, June's 0.1% cut was repeated, in what Mr Draghi
described as a ''technical adjustment''.
The official interest rate was now 0.05% and the deposit rate
was -0.2%, meaning it costs banks to not lend money.
''Job well done. 'Rates are now at the lower bound and this
time I am serious', he essentially said,'' Mr Speizer said.
The ECB would purchase a broad portfolio of asset backed
securities from next month.
The New Zealand Reserve Bank makes its official cash rate
next week and is widely expected to keep its rate at 3.5%.
Craigs Investment Partners broker Chris Timms said the ECB
was trying to stimulate its economy while the Reserve Bank
was trying to cool down the economy of New Zealand.
The geopolitical situation in the Middle East and the
Ukraine, had kept the New Zealand dollar falling slightly
against the US, Australian and United Kingdom currencies.
But, eventually, the interest rate differential between New
Zealand and other Western nations would see people buying in
New Zealand because of higher interest rates.
The election campaign in New Zealand was also helping keep
the dollar lower because of the uncertainty around the