The ECB has said that it will not be lifting interest rates until 2020 and has further gone ahead to announce low-interest loans.
The European Central Bank announcement has been quite surprising and is an indication of slowing economic growth. Mario Draghi, the ECB president has offered to provide cheap loans to troubled banks in the eurozone.
The macroeconomic forecast for eurozone growth has been cut down. It has been lowered to 1.1 percent from the earlier forecast of 1.7 percent.
The eurozone has not been faring well and data was not very optimistic last year. Though recent figures have been more encouraging, investors are still worried about the decline in the European and U.S. stocks.
The euro has dropped 0.3 percent against the dollar. It was trading at 1.10 pm GMT at $1.1275. The value of the euro has been lowered with the announcements of low-interest rates to stay for quite some time.
The chief beneficiary of lower interest rates will be Italy. Italian debt, the highest in Europe will enjoy the decrease in interest rate. On the announcement from the ECB, the Italian banks surged 1 percent immediately.
Draghi has further said that the eurozone growth has slipped by 0.2 percent in the fourth quarter of 2018. Further, the outlook for the months ahead in the year 2019 has also deteriorated with the global economy doing a downturn.
If the ECB and individual government do not interfere, there is a danger of a recession occurring in the eurozone, believe analysts.
The ECB has followed the Federal Reserve to provide ongoing liquidity to its eurozone banks. It has altered its forward guidance so that rates will remain at low levels throughout the year 2019.
The economic stability in Beijing will also accelerate growth in Europe, expect analysts. The stimulus will continue and will not be withdrawn, says the ECB.