For the first time in history, the European Central Bank has reduced the deposit rate to a negative level - from 0 to minus 0.1%, the base rate - from 0.25 to 0.15% per annum (also a record low), and the marginal loan rate - by 30 basis points to 0.4%.

Weak macroeconomic indicators (see inset) and the threat of deflation are forcing rates to be lowered, ECB President Mario Draghi admitted, the regulator is ready to use unconventional stimulus measures, including cheap money programs: “We need to support lending.”

The ECB will also launch several rounds of targeted long-term lending (LTRO) at a fixed rate, initially worth 400 billion euros, Draghi said, and a programme to buy back asset-backed securities is being prepared.

Business indicators have remained weak since the beginning of 2014, consumer spending dynamics are disappointing, there is no significant improvement in export indicators, analysts at Capital Economics describe, against the general background, the situation looks good only in Germany, while in France everything is heading towards recession.

In recent months, Draghi has repeatedly promised to use the full range of monetary stimulus tools to support the economic recovery, but has been slow to act. “Finally the ECB has done something,” analysts at Aberdeen Asset Management said. We need to be especially vigilant now, when there are risks of a dangerous spiral for the economy - low inflation, falling inflation expectations and problems with lending, Draghi complained in May.

Rate cuts won't do much for the economy: European banks don't have much money on deposit at the ECB, says Chris Weafer of Macro Advisory. But the measures announced are a signal to the market that the ECB is ready to take decisive action to stimulate growth, he continues: a key part of the plan will be a weaker euro.

A strong euro is a serious problem for the economy, Draghi admitted. Yesterday, after his statements, the euro to dollar rate fell to $1.3503, but in a day it rose from $1.3608 to $1.3616. According to the forecast of Capital Economics, by the end of 2014 the rate will fall to $1.3, in 2015 - to $1.25. But the Fed also wants to avoid a strengthening dollar, so soon we will probably see a fight between the ECB and the Fed, Weafer believes.

There is also a political factor in the ECB's increased activity: the weak economy has changed public sentiment, Weafer notes. The latest European Parliament elections have shown the rise in popularity of nationalists and anti-European parties. Political pressure on the ECB from the leaders of the bloc's largest economies has increased, Weafer notes: it is necessary to spur economic growth by any means necessary, which will return the traditional parties to their former popularity.

ECB's Loss-Making Deposits