The ECB has cut its rates once again - but what does that mean?

Nick Bullman of Check Risk spoke to Ivan Yates this morning

The ECB has cut its rates once again - but what does that mean?

In this file photo, the Euro sculpture stands in front of the European Central Bank, right, in Frankfurt | Image: Michael Probst / AP/Press Association Images

The European Central Bank issued a surprise announcement yesterday, saying it would once again lower interest rates, bringing them to 0%.

The euro dipped 1% against the dollar following the decision, but recovered by the end of the day. The ECB also reduced the already negative deposit rate and increased monthly asset buys from €60bn to €80bn.

Check Risk's Nick Pullman joined Ivan on Newstalk Breakfast to explain the consequences of the move.

He said it's a continuation of the ECB's expansion policy and will increase its balance sheet substantially.

But why would anyone set interest rates below 0%?

"The idea of negative interest rates," Bullman says, "is to force banks to commence lending back into the private sector, and eventually when it arrives at positive rates, to force people who have cash in the bank to go out and spend it."

However, despite these extreme measures, the eurozone economy continues to flag as a whole. High unemployment continues throughout the euro states, and business practices remain stagnant, he says.

According to Bullman, the quantitative easing programme has not shown results, and that global debt has risen by almost a half since 2008: