The European Central Bank unexpectedly cut its interest rate a quarter point to 1.25% at its first meeting with new President Mario Draghi at the helm. Markets reacted favorably to the move, with the DAX up 2.8%, the CAC 40 2.7% and the FTSE up 1.1%.
Draghi has taken office in the midst of a crisis, between worries over a proposed Greek referendum (which the Greek prime minister retracted on Thursday) on its latest bailout package that could lead to its expulsion from the eurozone and strife at home in Italy over Prime Minister Silvio Berlusconi’s handling of the country’s financial woes. Reuters reported that, although inflation has been, at 3%, running well over the ECB’s goal of under 2%, officials decided that the move was necessary.