EUR – ECB Holds Rates at 0.25 Percent Despite Deflation Fears

The European Central Bank (ECB) has kept its benchmark interest rate at a record low of 0.25%.

Persistently low inflation across the euro-bloc has prompted growing calls that the ECB should cut rates to head off deflation risks.

But rate-setters at the Bank may have been buoyed by recent economic data pointing to a stronger recovery and improved financing conditions.

Earlier on Thursday, the UK’s Bank of England held interest rates at 0.5%.

Eurozone interest rates have been unchanged since November 2013.

ECB president Mario Draghi has been saying for months that the bank expected “a prolonged period of low inflation”.

Eurozone inflation in April was 0.7%, up from 0.5% in March, but still well below the ECB’s target of about 2%.

Mr Draghi said in April that if the inflation outlook was to deteriorate, the ECB could respond with a “broad-based asset purchase programme”, probably quantitative easing – effectively printing money to buy assets.

Speaking at a press conference after the latest ECB decision, Mr Draghi said that the “moderate economic recovery… is proceeding in line with our expectations”.

via BBC

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