The European Central Bank left interest rates unchanged as it waits to see if the current record low boost tepid recovery in the 19 countries that share the euro currency.
ECB said Thursday that its board of 25 members has kept its key benchmark zero. The refinancing rate determines the cost of credit from the central bank to commercial banks, and by directing many other short-term lending rates.
The central bank also do not touch its rate of less than 0.4 percent of the funds left on deposit at the central bank by commercial banks. This very unusual negative rate seeks banks to lend money, not storage.
Analysts expect the head of the ECB Mario Draghi stress at a news conference that the bank could add stimulus measures if needed to stimulate the economy in the 19 countries that use the euro . Taken together, they are the second largest economy in the world after the US and ahead of China, according to figures from the World Bank.
In addition to holding interest rates drastically to bottom, chief monetary authority of the euro area is pumping newly printed money into the banking system by buying bonds of banks at the rate of 80 billion euros (0 billion dollars) a month. It also envisages long-term loans to banks that earn negative interest -. That is, the ECB will provide banks to take loans instead of the reverse
The rates and new loan cheap injections aimed at increasing inflation at its current level of zero. Which is considered too low for a healthy economy, and it is far from the target of the ECB to just under 2 percent. More money and credit should also boost growth and reduce unemployment.
Draghi can also meet German criticism of ultra-low ECB rates. Some conservative German politicians have grumbled about the low returns for savers and retirement savings. Minister Wolfgang Schaeuble went up to half the credit support to the anti-euro, anti-immigration Alternative for Germany party to public discontent on the ECB's policies.
The Treaty on European Union which created the ECB and the euro allowed the central bank to take advice from governments, and said governments members agree to comply. Political independence protects a central bank to pressure from politicians who may want the more expansive monetary policy that could help them get re-elected -. but could cause long term damage
The economy of the euro zone rose 0.3 percent in the fourth quarter of last year; unemployment rose to 10.3 percent, but slowly falling, with pockets of unemployment much higher in places like Spain and Greece who have trouble with too much debt.
Bloomberg
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