UPDATE: The European Central Bank just cut interest rates by 25 basis points to 0.75 percent.
That is the lowest ECB benchmark rate target ever.
It also cut the deposit rate to zero from 0.25 percent, and the marginal lending rate to 1.5 percent.
While this is an important move for the ECB, it is not clear whether this development will do anything to bolster confidence in the bank or the markets as it was largely expected.
The euro is tanking on this news, but US futures haven't really moved since the announcement. European shares are generally higher.
Here's the full release:
5 July 2012 - Monetary policy decisions
At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:
The interest rate on the main refinancing operations of the Eurosystem will be decreased by 25 basis points to 0.75 percent, starting from the operation to be settled on July 11, 2012.
The interest rate on the marginal lending facility will be decreased by 25 basis points to 1.50 percent, with effect from July 11, 2012.
The interest rate on the deposit facility will be decreased by 25 basis points to 0.00 percent, with effect from July 11, 2012.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET [Central European Time] today.
ORIGINAL: The European Central Bank is about to make its latest monetary policy decision, and for the first time in a long time investors are convinced that this announcement won't be a snooze.
That's because they're expecting at least a 25 basis point cut in the target rate, accompanied by similar cuts in the deposit rate. Many analysts expect even more.
The latest ECB decision comes out at 7:45 a.m. (ET), and it will be followed by a press conference from ECB President Mario Draghi at 8:30 a.m. (ET).
We'll also be looking for non-standard measures. The likelihood that we'll see another multiple-year long-term refinancing operation is slim. That's because the effects of giving more cheap cash to banks to relieve funding costs for banks and sovereigns would probably be much less dramatic than those we saw when the ECB announced two three-year LTROs in December.
In this vein, the biggest threat to ECB action is the fact that monetary policy may not do anything because the problems of the euro zone are very clearly not loose money. The traditionally conservative central bank will have to weigh the possible consequences of looser cash and potentially unsustainable support for banks with the immediate effects of monetary policy action.
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