The European Central Bank has kept interest rates unchanged amid the low oil price and the difficult start to the year, but warns they will stay low “for an extended period”.
The central bank left interest rate on hold at 0.05 per cent, while the overnight deposit rate was left at -0.3 per cent.
In the press conference following the policy announcement ECB president Mario Draghi said “we expect interest rates to stay like this for an extended period of time”.
However Draghi said the bank will “review and possibly reconsider our monetary policy in March, when new economic projections will become available”.
He says: “In the meantime work will be carried out to ensure all the technical conditions are in place.”
In December, the overnight deposit rate was cut from -0.2 per cent in an attempt to push banks to lend.
That same month the ECB extended its monthly €60bn stimulus programme by six months to March 2017.
Draghi also said the decision of early December to extend the asset purchase programme was “fully appropriate”.
However, as the start the new year showed downside risks raised by the emerging market slowdown, geopolitical turmoil and volatility in the markets, Draghi expects the path of inflation to stay weak.
Draghi said in this environment inflation, which was at 0.2 per cent in December, “continues to be weaker than expected”.
He says: “The expected path in 2016 of inflation is significantly lower compared to the outlook in December. It’ll remain low or negative and pick up only later in 2016.”