News Column

ECB Keeps Interest Rates Down, Economy Perks Up

August 1, 2013
The eurozone is showing signs of recovery.

The European Central Bank announced Thursday it had left interest rates on hold at a historic low of 0.5 per cent amid signs that the eurozone's recession could be coming to an end.

Since the ECB's 23-member rate-setting council last met four weeks ago, a series of key economic indicators have pointed to the 17-country eurozone edging back towards a growth path after it shrank for a sixth quarter in the first three months of the year.

This included the release during the council's Frankfurt meeting of a key survey showing the eurozone's manufacturing sector had returned to growth in July for the first time in two years.

ECB chief Mario Draghi is expected to use his press conference to point to the positive economic developments underway across the region.

But he is also likely to face a barrage of questions from reporters about the bank's plans to improve transparency by publishing the minutes of its meetings - something Draghi said he wanted to do earlier this week.

This followed calls from two executive board members for the bank to follow the example of other major central banks such as the US Federal Reserve and the Bank of Japan in releasing the minutes of monetary policy deliberations, which the ECB had previously kept secret.

The move to greater openness also comes after the Frankfurt-based bank took another unprecedented step at its last meeting when it announced it was introducing a policy of forward guidance on its plans for interest rates.

At his last monthly press conference, Draghi said the bank pledged to keep interest rates at record low levels for an extended period.

The ECB chief is expected to reaffirm that rates will remain low.

But he is likely to again face questions on how the ECB defines the timeframe for its forward guidance policy.

Data published Wednesday showing annual inflation in the eurozone held steady at 1.6 per cent in July is likely to give the ECB room to trim interest rates again this year if its forecast of a pickup in the currency bloc fails to materialize.

For the sixth consecutive month, consumer prices have remained below the bank target of keeping annual inflation under 2 per cent.

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Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH

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