Super Mario Cut Interest Rates Today And That's Huge News | WAMU 88.5 - American University Radio

NPR : News

Filed Under:

Super Mario Cut Interest Rates Today And That's Huge News

Twitter's IPO is Thursday's sexy business story.

But the really big business news is that "the European Central Bank startled investors Thursday with a surprise cut in its benchmark interest rate." As The Associated Press adds, "The bank lowered the benchmark refinancing rate to a record low 0.25 percent from 0.5 percent."

Here's why that's important:

"This was the European Central Bank," writes Neil Irwin at The Washington Post's Wonk Blog. "The hard-line, inflation-phobic, Germany-based institution that sets monetary policy for the 17-nation euro zone and has been reluctant to do anything that might risk even the eensiest bit of inflation. ... Analysts had assigned only perhaps a one-in-four or so chance it would make such a move, and thought it more likely the ECB would drag its feet and wait for more data to prove that Europe is falling into a Japan-style deflation trap."

And ...

"The unexpected nature of the rate cut," says Bloomberg News, underscores ECB President Mario Draghi's status "as a central banker prepared to tackle head on" the challenges facing the euro zone.

The greatest challenge in the zone now could be deflation, many analysts say.

"While lower prices might seem like a good thing for consumers, in fact deflation is considered even more dangerous than runaway inflation," warns The New York Times. That's because:

"When prices fall, consumers and businesses delay purchases because they expect goods to become even cheaper. Corporate profits decline, and companies are forced to pay their workers less. A spiral begins that is difficult to arrest.

"Deflation could be particularly destructive in Europe, where governments, banks and private households are still struggling with excess debt. When companies and individuals earn less, they have trouble repaying their debts, which remain the same."

So if "Super Mario" (as the Italian banker is called by many in the European media) is moving to head off a potential deflation spiral, that could boost Europe's still sluggish economies — which is good news for the rest of the world if that means Europe's appetite for imports will perk up.

The bad news, as news outlets note, is that the ECB doesn't have much more room to maneuver on interest rates. The next step lower than 0.25 percent is zero. What's more, the AP says:

"The ECB theoretically could also engage in so-called quantitative easing — using newly created money to buy bonds in the open market. That tool has been deployed by the U.S. Federal Reserve, Bank of England and Bank of Japan. But analysts say the ECB faces serious technical and political obstacles to doing that because it is a single central bank for 17 countries. That raises the question of how to apportion the purchases among 17 different bond markets."

But for now, financial market's are rallying in part on the news that Super Mario is on the case. And that's big news.

Copyright 2013 NPR. To see more, visit


For Paul Cezanne, An Apple A Day Kept Obscurity Away

In the 1800s, still-life painting was the bottom feeder of the art world, but that's where the French painter chose to leave his mark. "I want to astonish Paris with an apple," he's said to have said.

From McDonald's To Organic Valley, You're Probably Eating Wood Pulp

Many processed foods contain cellulose, which is plant fiber that is commonly extracted from wood. It's used to add texture, prevent caking and boost fiber. And it's been around for ages.
WAMU 88.5

Virginia Democrats And Republicans Fight Over Investigating Senator's Resignation

Democrats and Republicans in Virginia are at odds over the value of investigating the state Senator Phil Puckett, who resigned last month to take a job at a state tobacco commission — and turned the Senate over to Republicans.

Fake Edward Snowden Joins Tinder

The popular dating app Tinder has a new user: Edward Snowden. Actually, just the username Lonely Ed with the profile picture of the NSA leaker looking for love from Moscow.

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.