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Mario Draghi presenting economic projections stretching into 2016 for the first time Euro zone inflation is running at 0.8%, far below the ECB’s target of just under 2%
The European Central Bank decided not to take any action at its meeting today because economic and monetary conditions had not changed enough to warrant it, ECB President Mario Draghi said.
The ECB left its main interest rate unchanged at a record low of 0.25% today, despite fears inflation could get stuck in a “danger zone” below 1%.
The decision to leave rates unchanged was expected, though a minority of economists polled by Reuters had expected a cut.
The ECB also left unchanged the deposit rate it pays on bank deposits at 0%, and held its marginal lending facility- or emergency borrowing rate – at 0.75%.
As well as leaving rates unchanged, the ECB also failed, as many had expected, to suspend weekly operations to soak up money it spent on sovereign bonds at the height of the euro zone debt crisis, known as sterilisation.
“The suspension of sterilisation is one of the instruments that is in our list but we didn’t see any development in the money markets that would lead to that unwanted tightening of monetary conditions that would justify the use of this instrument,” Draghi told a news conference in Frankfurt today.
He also said a survey of conditions showed no major changes to prompt any moves.
Pausing the so-called sterilisation of the Securities Markets Programme (SMP) would have added around €175 billion in liquidity to the market.
Meanwhile, the European Central Bank today raised slightly its growth forecast for the euro area this year, but trimmed its forecast for inflation.
ECB president Mario Draghi said the bank was pencilling in economic growth of 1.2% in 2014, 1.5% in 2015 and 1.8% in 2016, while inflation was expected to average 1% in 2014, 1.3% in 2015 and 1.5% in 2016.
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