ECB keeps Eurozone interest rates on hold

EU-Euro-Europe-Eurozone-700x450.jpgThe European Central Bank has kept its interest rates on hold despite a pick-up in inflation in the region.

Eurozone inflation now stands slightly above the central bank’s target of just below 2 per cent.

The main interest rate remained at 0 per cent and the central bank’s current bond-buying programme of €80bn (£69.5bn) also remained unchanged.

The deposit rate levy charged on a portion of reserves parked at central banks in the region also remained at minus 0.4 per cent.

The central bank will trim the quantitative easing programme to €60bn from next month until the end of December 2017, or beyond, if necessary.

ECB president Mario Draghi says current monetary policy continues to support the economy but suggests scenarios can change if headline inflation remains subdued.

In the press conference held today in Frankfurt following the announcement, Draghi said “the risks of deflation have largely disappeared” but he is not yet ready to “pronounce victory on the inflation front”.

In a statement following the monetary policy update, the ECB says: “Our monetary policy measures have continued to preserve the very favourable financing conditions that are necessary to secure a sustained convergence of inflation rates towards levels below, but close to, 2 per cent over the medium term.

“Their ongoing pass-through to the borrowing conditions for firms and households benefits credit creation and supports the steadily firming recovery of the euro area economy. Sentiment indicators suggest that the cyclical recovery may be gaining momentum.

“Headline inflation has again increased, largely on account of rising energy and food price inflation. However, underlying inflation pressures continue to remain subdued. The Governing Council will continue to look through changes in HICP inflation if judged to be transient and to have no implication for the medium-term outlook for price stability.”