In April, however, the Governing Council became concerned about downside risks to price stability, mainly stemming from the weakening of (domestic) economic activity. Consequently, the Governing Council decided to lower the interest rate on the ECB’s main refinancing operations by 50 basis points to 2.50%.
The belated realization by the rating agencies of the poor quality of these loans resulted in downgrades of structured products with exposure to subprime mortgages, often by multiple notches.