Change Edition

ECB holds key rate steady at 0.25%
Economics

ECB holds key rate steady at 0.25%

2 min. 06.03.2014 From our online archive
The European Central Bank held its key interest rates steady at its monthly policy meeting on Thursday, as largely expected, keeping the central "refi" or refinancing rate at 0.25 percent.

(AFP) The European Central Bank held its key interest rates steady at its monthly policy meeting on Thursday, as largely expected, keeping the central "refi" or refinancing rate at 0.25 percent.

The central bank said in a statement it also held its other two key rates - the marginal lending rate and the deposit rate - unchanged at 0.75 percent and zero percent respectively.

The ECB last pared back eurozone borrowing costs in November.

And while few ECB watchers had been betting on a further cut this month, there had been some outside speculation that the central bank could ease monetary conditions in the 18 countries that share the euro given the worryingly low level of inflation.

Nevertheless, the spectre of deflation - the destructive spiral of falling prices in which consumers put off purchases, thus destroying salaries, jobs and investment - is being kept at bay.

Eurozone growth picks up

The latest data compiled by the EU's statistics agency Eurostat put area-wide inflation at 0.8 percent in February, the same level as in January.

While that is admittedly still way below the ECB's target of just under 2.0 percent, it was fractionally better than the 0.6 percent that many economists had been predicting.

ECB President Mario Draghi was scheduled to explain the reasoning behind the decision at a news conference and also reveal the ECB's latest updated growth and inflation forecasts.

But analysts insisted the cycle of monetary easing was not necessarily over and they predicted that Draghi would reiterate the ECB's mantra that all options were still open and it would do everything needed to get the eurozone economy back on its feet.

Data released Wednesday showed that eurozone growth picked up to 0.3 percent in the final quarter of last year, and forward-looking data was also encouraging, but the modest rate of expansion suggests the recovery is still fragile and far sufficient to make a dent in near record unemployment.

"We are clearly not in deflation"

"Although we expect Draghi to suggest that all options are still open, we suspect the ECB to have borrowed some time on the back of relative stability in money market rates and moderate growth confirmed by recent data," said Newedge Strategy analyst Annalisa Piazza.

"The new updated profile for inflation will be unveiled during the press conference and it might help to get some clue on future prospects," she said.

ECB chief Draghi insisted last week that while eurozone inflation is low, he saw no danger of deflation.

Even though current inflation rates "can clearly not be considered close to 2.0 percent... we are clearly not in deflation, which is defined as a self-reinforcing fall in prices that is broad-based across items and across countries," Draghi said.