News Column

ECB leaves rates unchanged despite low inflation

May 8, 2014



Frankfurt, May 8 (EFE).- The European Central Bank on Thursday left its benchmark interest rate at the record low level of 0.25 percent despite the low inflation rate in the Eurozone.

The ECB's Governing Council decided at a meeting in Brussels to leave the marginal lending facility, the rate it charges for one-day loans, unchanged at 0.75 percent.

"Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. Incoming information continues to indicate that the moderate recovery of the euro area economy is proceeding in line with our previous assessment," ECB chief Mario Draghi said.

The interest rate on the ECB's deposit facility remains at 0 percent.

"Recent information remains consistent with our expectation of a prolonged period of low inflation followed by only a gradual upward movement in HICP inflation rates," Draghi said.

The majority of analysts expected no change in policy from the ECB at this meeting.

The ECB's Governing Council met in Brussels on Thursday because it usually holds two meetings a year outside its Frankfurt headquarters.

Deflation has become a concern in the Eurozone, which saw the year-on-year inflation rate tick up two-tenths of a percentage point to 0.70 percent in April.

"According to Eurostat's flash estimate, euro area annual HICP inflation was 0.7 percent in April 2014, up from 0.5 percent in March. As expected, given the timing of Easter, the increase was mainly due to a rise in services prices. On the basis of current information, annual HICP inflation is expected to remain around present low levels over the coming months, before only gradually increasing during 2015 to reach levels closer to 2 percent toward the end of 2016," Draghi said.

Draghi has not responded to warnings from the International Monetary Fund, or IMF, the Organization for Economic Cooperation and Development, or OECD, and even some European leaders, such as French President Francois Hollande, about the dangers of deflation.

Central banks around the world have been pumping liquidity into their economies in an effort to ramp up growth in the wake of the worst economic downturn since the Great Depression.

The Bank of England left its benchmark rate unchanged on Thursday and stayed the course on asset purchases.

The U.S. Federal Reserve has kept short-term interest rates near zero and implemented an aggressive monetary stimulus program pegged to unemployment and inflation targets. EFE

aia/hv


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Source: EFE Ingles


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