The Impact of ECB’s Surprise

The European Central Bank managed to temporarily jolt markets Thursday, cutting rates when it was not expected to act.

While positive in that it could help keep a lid on the euro, the question is whether the ECB’s move will have any lingering impact if it is not met with fiscal help.

The ECB cut its main interest rate by a quarter point to 0.25 percent and cut its emergency lending facility by 0.25 percentage points to 0.75 percent. It kept its deposit rate at zero. While speculation increased about a rate cut after a very low October inflation reading, many strategists had not expected the ECB to make a move until December.

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