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European Central Bank keeps interest rates unchanged

4 years ago208 views

The European Central Bank has kept interest rates unchanged at a record low 0.25 percent, even though inflation has fallen to its lowest in more than four years.

ECB President Mario Draghi and the bank’s policymakers are standing pat even though annual inflation in the 18-member eurozone fell to 0.5 percent in March.

The ECB also made no adjustment to the rate it pays to retail banks when they leave money on deposit with it overnight – it remains at zero.

In recent weeks, Governing Council members have been willing to publicly talk about the possibility of cutting deposit rates below zero – effectively charging banks to hold cash with the ECB, thereby making it more likely that money will be loaned out to businesses or individuals.

They have also spoken about the possibility of embarking on bond purchases as the United States, Japan and Britain have, if the threat of deflation became more acute.

The wait and see approach comes despite concerns among some economists that the bloc risks slipping into a spiral of sinking prices and meagre growth.

Their view seems to be that the slowdown in inflation is driven by the kind of softer food and energy prices the bank usually judges as temporary.

There was little market reaction to the news.

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