Brussels, 18/09/2001 (Agence Europe) - As pointed out yesterday, the European Central Bank has lowered its rates in a concerted gesture with the US Federal Reserve, in order to reduce the risks of recession following the attacks perpetrated on the United States. We give below the full text of the press release announcing this decision: "Following the terrorist attacks on the US, uncertainty about the US and the world economy has increased. The Federal Open Market Committee has reacted by lowering its target for the federal funds rate today. In concert with this decision, the Governing Council of the ECB met today by means of teleconferencing and took the following monetary policy decisions: 1) The minimum bid rate on the main refinancing operations of the Eurosystem will be reduced by 0.50 percentage point to 3.75%. Differently from what was communicated in an announcement at 3.30 p.m. today, this change in the minimum bid rate will be effective starting from tomorrow's operation, which is to be settled on 19 September 2001. A new announcement with the revised rates is also being transmitted through wire services. 2) The interest rate on the marginal lending facility will be reduced by 0.50 percentage point to 4.75%, with effect from 18 September 2001. 3) The interest rate on the deposit facility will be reduced by 0.50 percentage point to 2.75%, with effect from 18 September 2001.
In the view of the Governing Council, the recent events in the US are likely to weigh adversely on confidence in the euro area, reducing the short-term outlook for domestic growth. As this is likely to further reduce inflationary risks in the euro area, a lowering of the ECB's key interest rates is appropriate. The Governing Council has confidence in the fundamental strength and resilience of the US economic system. Against the background of the sound fundamentals of the euro area, the Governing Council remains confident that the slowdown in economic growth will be short-lived."
Welcome from Commission, mitigated reception from Parliament
The above decision was immediately welcomed by Commissioner Pedro Solbes and the Chair of the EP Committee on Economic and Monetary Committee, Christa Randzio-Plath. Such a welcome was not shared by Luxembourg Socialist Robert Goebbels, who states that "the ECB sins through lack of visibility in its monetary policy. Its decision (…) comes too late, but it should nonetheless be welcomed as a positive sign for restoring growth in the European and world economy". In his view, the ECB is "resigned" to doing what the American Central Bank did after the markets opened and at a time when "orders were already launched". "The over-hasty change in opinion on the part of the ECB could no longer stop the fall in prices", continued Mr Goebbels, before concluding: "the ECB must communicate better and guide the markets but not follow them into panic".