On June 5th the European Central Bank reduced its main policy interest rate by 10 basis points to 0.15 percent in response to the slow recovery and low inflation rates in the eurozone. On addition, the ECB announced the availability of 400 billion Euros in long term loans to eurozone banks. The hope is banks lend more money to the private sector, particularly small and medium sized businesses that were among the main victims of the credit crunch in southern Europe. The ECB’s actions should provide a small temporary boost to the eurozone’s economy but the effect on the speed of the recovery will be limited.
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