Economy, Europe

European Central Bank keeps interest rates constant

Interest rates to remain at present levels at least through this summer, says ECB head Mario Draghi

European Central Bank keeps interest rates constant

By Muhammed Ali Gurtas


The European Central Bank (ECB) on Thursday decided to keep key interest rates steady.

According to a statement from the ECB's Governing Council, the interest rate on the main refinancing operations was kept at 0.00 percent.

With no change, the interest rates on the marginal lending facility and the deposit facility continue to stand at 0.25 percent and minus 0.40 percent, respectively.

Speaking at a press conference in Frankfurt, the bank's head Mario Draghi said: "We continue to expect them to remain at their present levels at least through the summer of 2019."

"Regarding non-standard monetary policy measures, we intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase program for an extended period of time past the date when we start raising the key ECB interest rates," he said.

He added that this would continue "in any case for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation."

The ECB head stated that the persistence of uncertainties in particular relating to geopolitical factors and the threat of protectionism is weighing on economic sentiment.

"At the same time, supportive financing conditions, favorable labour market dynamics, and rising wage growth continue to underpin the euro area expansion and gradually rising inflation pressures.

"This supports our confidence in the continued sustained convergence of inflation to levels that are below, but close to, 2 percent over the medium term," he said.

Falling inflation

Last week, the EU's statistical office announced that the 28-member bloc's annual inflation rate was 1.7 percent in December 2018, down from November's 2.0 percent.

According to Eurostat, annual inflation fell in 22 member states, remained stable in three, and rose in three in December.

"Significant monetary policy stimulus remains essential to support the further build-up of domestic price pressures and headline inflation developments over the medium term," said Draghi.

"This will be provided by our forward guidance on the key ECB interest rates, reinforced by the reinvestments of the sizable stock of acquired assets."

From 2008 to 2018, the lowest annual figure in the EU was seen in January 2015 at minus 0.5 percent -- when prices were in fact dropping -- as the highest annual inflation rate was in July 2008, at 4.4 percent.

"In any event, the Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the Governing Council’s inflation aim in a sustained manner," Draghi added.

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