Key highlights of the week ended March 11

Source: Dukascopy Bank SA
Euro zone
European Central Bank President Mario Draghi unveiled bold easing measures, slashing interest rates and expanding asset purchases, in a bid to revive the Euro zone's struggling economy. The Frankfurt-based central bank cut the interest rate on the main refinancing operations by five basis points to zero, slashed deposit rate by 10 basis points to –0.4% and trimmed the marginal lending rate, used by banks to borrow from the ECB overnight, to 0.25% from 0.3%. On top of that, the ECB raised monthly asset purchases to 80 billion euros from 60 billion euros. Mr Draghi said that the central bank's stimulus measures are indented to last until March 2017 or longer if necessary. Moreover, the ECB chief implied interest rates would remain very low for at least another year, but played down expectations they could be slashed even further. 

Canada
The BoC kept its benchmark interest rate on hold as it awaits for Ottawa's forthcoming spending plans to stimulate the nation's economy before taking any further steps. The central bank maintained the target for the overnight rate steady at 0.5%, noting that the near-term economic outlook remains virtually unchanged from January. The BoC said that while stubbornly low oil prices continue to derail the Canadian economy, it noted that inflation appeared on track and that 2015 closed out with better than estimated growth. Canada's GDP increased an annualized 0.8% in the final quarter of 2015, while for the whole year the nation's economy grew 1.2%. The central bank expects that economic output will increase 1% in the first quarter of the year. However, financial vulnerabilities have increased and the commodity-price decline has left overall business investment very weak.

New Zealand
The RBNZ stunned markets by cutting the official cash rate and said that further easing may be required to help offset a recent decline in inflation expectations and help faltering dairy sector amid weak global economic background. The RBNZ lowered the country's cash rate by 25 basis points, taking it to a record low of 2.25%. In a statement, the central bank said the outlook for the world's economy had deteriorated since December, due to slower growth in China and Europe. The surprised decision came just five weeks after Governor Graeme Wheeler's speech in which he signaled no rush to ease further in response to weak inflation.

UK
The BoE is more likely to hike interest rates than to cut them over the course of the next two years, and has plenty of scope to stimulate the UK economy if needed, said Martin Weale. Mr Weale voted to raise the central bank's key rate during the second half of 2014 but abandoned the call at the beginning of last year. The policy maker also played down the significance of the turbulence in financial markets. Meanwhile, economists pushed back their bets on when the BoE would start to hike rates to early 2017, due to a weaker global economy and stubbornly low inflation. Moreover, Weale said that the BoE could cut rates to lower than 0.5% and introduce a new round of quantitative easing should the necessity arise. The scope of asset purchases could be expanded to include long-term holdings of private sector assets as well as government bonds.  

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