The European Central Bank left interest rates unchanged on Wednesday, holding them at record lows as it continues a money-printing scheme to lift the economy.
The decision to leave the cost of borrowing unchanged was widely expected after the ECB cut rates to rock-bottom levels last September and said they had hit “the lower bound”.
At Wednesday’s meeting, the ECB left its main refinancing rate, which determines the cost of credit in the economy, at 0.05 per cent.
It also kept the rate on bank overnight deposits at -0.20 per cent, which means banks pay to park funds at the central bank, and held its marginal lending facility - or emergency overnight borrowing rate for banks - at 0.30 per cent.
QE
Mr Draghi said that monetary policy stimulus is filtering through to the real economy, as he insisted the European Central Bank needs to see its bond-buying plan through to the finish.
“The asset purchase programs are proceeding well,” the ECB president said at a press conference in Frankfurt today, after officials kept interest rates on hold.
He unveiled economic forecasts for a pickup in growth and inflation in the next three years similar to the outlook from March, and said that is dependent on “full implementation” of stimulus. Since the ECB started its €1.1-trillion quantitative easing program, inflation in the 19-nation euro area has bottomed out, even though it remains far below the ECB’s goal of just below 2 per cent.
Mr Draghi said inflation rates should continue to pick up over the next two and a half years. “We expect the economic recovery to broaden, and domestic demand should be further supported by monetary policy measures,” Mr Draghi said. Presenting fresh forecasts, he said the outlook remains basically unchanged. Growth in 2015 is expected to average 1.5 per cent, and 1.9 per cent in 2016. The forecast is 2 percent for 2017.
Greece
Mr Draghi called for a “strong agreement” with Greece to ensure it stays in the euro zone and also has a sustainable economy. “The governing council of the ECB wants Greece to stay in the euro. But there should be a strong agreement, and a strong agreement is one that produces growth, that has social fairness but that is also fiscally sustainable and addresses the remaining sources or factors of financial instability in the financial sector,” he told a news conference.
Greece continues to wrangle with its euro zone backers to lighten the reforms it must make in return for further loans. In the meantime, its banks, and therefore its wider economy, are dependent on emergency central bank funding, sanctioned by the ECB.
- Reuters
