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Draghi's surprise ECB rates cut

Thursday, November 03, 2011 - 01:37

Nov. 3 - New European Central Bank President Mario Draghi cuts interest rates amid a worsening euro area economic outlook and warnings of a mild recession. Kirsty Basset reports.

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Mario Draghi has made his mark at his first meeting as head of the European Central Bank, with a surprise move. (SOUNDBITE)(English) HEAD OF THE ECB, MARIO DRAGHI, SAYING: "The governing council decided to reduce the key ECB interest rate by 25 basis points." He said inflation was likely to move below 2 per cent next year - adding that growth would also decline. (SOUNDBITE)(English) HEAD OF THE ECB, MARIO DRAGHI, SAYING: "The ongoing tensions in financial markets are likely to dampen the pace of economic growth in the euro area in the second half of this year and beyond." Markets had been eagerly awaiting comments from the new president, for any signs that he would boost the bank's bond buying program to help ease the pressure on debt laden euro zone members. But Draghi seemed to rebuff these calls. (SOUNDBITE)(English) HEAD OF THE ECB, MARIO DRAGHI, SAYING: "The securities market program is, always had, was meant to have, and it's been stated since the very beginning has three characteristics. First of all it's temporary. Second it's limited in its amount. And third, it's justified on the basis of restoring the functioning of monetary transmission channels." Nonetheless traders said on Monday the ECB had bought Italian and Spanish bonds. With Greece's government on the brink of collapse, there's growing pressure on the bank to step up the program to help ease market turmoil. Kirsty Basset, Reuters.

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