Date
27 May 2017
ECB president Mario Draghi speaks during a news conference at the bank’s headquarters in Frankfurt on Thursday. Photo: Reuters
ECB president Mario Draghi speaks during a news conference at the bank’s headquarters in Frankfurt on Thursday. Photo: Reuters

ECB holds rates steady but leaves door open to more stimulus

The European Central Bank (ECB) kept interest rates unchanged on Thursday but left the door open to more policy stimulus, citing uncertainty and risks to the economic outlook.

Britain’s decision to leave the European Union and weak emerging market growth leave the balance of risks tilted to the downside, the bank’s president Mario Draghi said after a policy meeting.

But he also noted that growth and inflation were both moving along the path projected in June. Hence, more evidence is needed before any further action, he said, according to Reuters.

“If warranted to achieve its objective, the Governing Council will act by using all the instruments available within its mandate,” Draghi said. “So I would stress readiness, willingness, ability to do so.”

The balanced comments give the ECB time until its September meeting to weigh the economic costs of Brexit without fuelling excessive market expectations, Reuters noted.

Keeping its deposit rate at minus 0.4 percent and the main refinancing rate at 0.00 percent, the ECB reaffirmed its guidance to keep rates at current or lower levels for an extended period and beyond the scope of its asset purchase program.

It also repeated that its 80 billion euro (US$88 billion) per month asset-buying program will run until March 2017, or beyond if necessary, until it sees an upward adjustment of inflation toward its target.

Brexit has been seen as a threat to the euro zone’s modest investment and consumption-led recovery. But on Thursday, Draghi appeared calm about it.

“Our assessment is that euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience,” he said.

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RC

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