ECB Holds Rate Says Recovery Will Be Uneven

The European Central Bank has kept its benchmark interest rate at 0.15%.

After announcing measures in June to kick-start eurozone growth, the ECB says it will now keep rates low “for an extended period of time in view of the current outlook for inflation”.

And ECB president Mario Draghi warned there would be a “continued moderate and uneven recovery” in the eurozone.

On Ukraine, he said it would closely monitor the effects of “geopolitical risks” on the modest economic recovery.

The ECB cut its benchmark rate from 0.25% to 0.15% in June, and also became the first major central bank to introduce negative interest rates.

The deposit rate for banks depositing money with the ECB went from zero to -0.1%. The aim was to encourage banks to lend to businesses rather than hold on to money.

The ECB also announced in June that long-term loans were to be offered to banks at cheap rates until 2018 in another attempt to boost banks’ lending to companies.

With Italy now officially back in the recession, and France’s President Francois Hollande warning about a “real deflationary risk” in Europe, the ECB is under pressure to ensure the eurozone’s slowdown does not become entrenched.

via BBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza