But in Europe, concerns grew that the ECB was reaching the limits of its capacity to head off catastrophe through ordinary policymaking means. Should the crisis worsen, the bank appears to have few tools ready to do more on a short-term basis.
The bank announced that it was reducing its benchmark interest rates to a record low 0.75 percent, down from 1 percent — a move that will make borrowing cheaper and could stimulate the sputtering national economies that share the euro currency.
“The risks surrounding the economic outlook for the euro area continue to be on the downside,” ECB President Mario Draghi said at a news conference in Frankfurt. Some of those risks “have materialized,” he added.
The moves in Europe and Asia sent mixed signals as to what the U.S. Federal Reserve might do in coming months. On the one hand, they could increase pressure on the Fed, revealing as they do the intensifying concerns about the global economy. On the other, the could bolster growth in those regions, lessening the burden on the U.S. central bank to act.
After the interest-rate announcement, European markets dropped and the value of the euro fell sharply against the dollar, down almost 1.2 percent from Wednesday. In the United States, the Dow Jones and Standard & Poor’s 500-stock index were down slightly, while the NASDAQ was flat.
The ECB also dropped the interest rates for its overnight-deposit facility to zero percent, down from 0.25 percent, in a bid to encourage banks to lend to each other rather than parking their money with the ECB, as well as to reduce money-market rates.
The ECB held back from more unconventional steps to take pressure off troubled countries, such as resuming the purchase of their debt, and Draghi said there were no plans to change that. He sounded pessimistic about whether major measures — such as renewing the program to extend long-term refinancing to banks, as the ECB did late last year — would work, saying: “It’s not obvious that there are measures that can be effective in a highly fragmented area.”
But analysts said the bank would soon be out of traditional ammunition and could be forced to turn to more politically controversial measures.
“We are reaching the point where we need something new to keep this going,” said Jens Sondergaard, a senior economist at Nomura.
In Beijing, the People’s Bank of China cut interest rates for the second time in four weeks, lowering interest on one-year loans to 6 percent and saying that banks can discount rates by as much as 30 percent below that benchmark, an increase from a 20 percent allowable discount. Analysts — who had expected a rate cut, but not until later this summer — said the changes probably reflect uncertainty about China’s second-quarter growth.