EUR – ECB Holds Rates at 0.25 Percent Despite Deflation Fears

May 8, 2014 Share Print 0

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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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.