European Central Bank surprises with broad stimulus action

FRANKFURT, Germany (AP) — European Central Bank launched an unexpectedly broad array of stimulus measures Thursday aimed at boosting a modest economic recovery in the 19 countries that use the euro and nudging up dangerously low inflation.

The steps, which ranged from interest rate cuts to cheap loans to banks, included several measures many analysts hadn't anticipated, such as expanding its monthly bond-buying stimulus program to include corporate bonds.

The ECB, the monetary authority for the euro countries, is struggling to raise inflation from a worryingly low annual rate of minus 0.2 percent toward its goal of just under 2 percent, considered healthiest for the economy.

Alasdair Cavalla at the Centre for Economics and Business Research in London suggested that the latest ECB steps were comparable to the last stage of U.S. Federal Reserve's stimulus efforts that promised open-ended stimulus until unemployment fell.

The Fed has ended its stimulus efforts and has made a first interest rate increase, as the U.S. economy has strengthened.

Yet the ECB's cut of the deposit rate below zero — also deployed by central banks in Japan, Denmark, Switzerland and elsewhere — has raised fears of side effects, in particular that it could dent bank profits.

Having healthy banks is crucial because they provide most business financing in Europe — a contrast with the United States, where most business credit comes from financial markets.