ECB cuts key rates, beefs up asset purchase programme

The European Central Bank on Thursday cut key interest rates and said it would spend tens of billions more to kickstart the chronically weak eurozone economy, sparking a sharp rally in stock markets.

Hessen: The European Central Bank came out all guns blazing Thursday to jumpstart the stalled eurozone economy, slashing already record-low interest rates, pumping massive new sums into the banking system and, for the first time, buying corporate bonds.

The unprecedented scale of the ECB`s action took financial markets by surprise, sparking a dramatic rise in eurozone stock markets and sending the euro lower against the dollar.

"The central bank came out all guns blazing on Thursday, cutting rates across the board and increasing both the size of the quantitative easing program and the list of eligible assets," said Craig Erlam, senior market analyst at Oanda.

The ECB said it is cutting its central "refi" refinancing rate to zero percent from 0.05 percent previously.

The rate on its marginal lending facility is going down to 0.25 percent from 0.30 percent and on the deposit facility to minus 0.40 percent from minus 0.30 percent.

The ECB said it would also expand the volume of bonds it purchases each month under its programme of quantitative easing to 80 billion euros from 60 billion euros.

And it would also start buying corporate bonds under the QE programme.

It further launched a new round of massive cheap loans for banks, known as TLTRO, from June.

The slew of measures came as inflation slipped back into negative territory in February for the first time in five months and as the economic outlook for the bloc was looking gloomier.

ECB President Mario Draghi had largely prepped the market to expect new measures, as he had promised that the ECB`s decision-making governing council would "review and possibly reconsider" the policy stance during Thursday`s meeting, but the scope of the new moves was beyond expectations, analysts said.