The European Central Bank responded to mounting market pressure and speculation of a rate cut this meeting, where the Governing Council voted to cut key interest rates by quarter basis point to 1.00%, the fourth move this year, while the Bank also cut the marginal lending facility by 25 bp to 1.75% also reduced the deposit facility to 0.25% from 0.50%.

At the ECB press conference, Mario Draghi, the fresh new President said that the decision was not unanimous, which indicates that next month further rate cuts and easing are not highly possible, yet Draghi declined to comment on the rate outlook, as he said never pre-commit.

In regards to growth Draghi said that growth revisions reflect the debt crisis uncertainty, yet the President said that the ECB expect growth to gradually recover next year. Concerning inflation, the President said inflation outlook remains broadly balanced, while downside risk to inflation is weaker growth.

The European Central Bank reported in the Monthly Bulletin the macroeconomic projections for the euro area growth, where the euro area is expected to grow in a range 1.5% and 1.7% in 2011 and between -0.4% and 1.0% in 2012, while the region could grow between 0.3% and 2.3% in 2013.

Regarding inflation projections, the ECB reported in the Monthly Bulletin that the annual HICP inflation is expected in a range between 2.6% and 2.8% in 2011 and between 1.5% and 2.5% in 2012, and finally between 0.8% and 2.2% in 2013.

The European Central Bank will adopt non-standard measures to aid banks, where the President said that the bank will offer three-year loans for banks in order to avert a credit crunch, to aid confidence and give certainty. Interest on these loans will be paid at the maturity of operation, while the bank will start the first operation on December 21, yet Draghi reassured that these measures, which also include reducing the reserve ratio to 1% from 2% and offering unlimited cash for banks, are temporary in nature.

Draghi called on all governments in the European Union to support fiscal sustainability, and added that fiscal consolidation is necessary and there are no other alternatives, yet the president welcomed the developments in Italy as he said that they are very encouraging, yet said that further measures will need to follow in Italy.