Business

ECB keeps interest rates at record low

ECB president Mario Draghi Image copyright Reuters
Image caption ECB president Mario Draghi has left interest rates alone

The European Central Bank has kept its main interest rate on hold at zero for another month.

The eurozone central bank's 25-member governing council left its benchmark borrowing rate at zero.

The rate on deposits from commercial banks was also unchanged at minus 0.4%.

The ECB decided against extending the duration of its two-year bond-buying stimulus scheme under which it has been making purchases of €80bn a month.

The central bank faces stubbornly low annual inflation of just 0.2% despite pumping €1 trillion in newly printed money into the banking system through bond purchases since March 2015.

Mario Draghi, president of the ECB, said he expected inflation rates to remain low for the next few months, adding: "We are monitoring developments in inflation expectations very closely and stand ready to act."

He said inflation would take a little longer than previously forecast to get to a level just below 2%, "but not much longer".

'Nervous'

The Bank anticipates annual inflation at 0.2% in 2016, 1.2% in 2017 and 1.6% in 2018, which it said remained broadly unchanged from previous projections.

Mr Draghi revealed that the governing council did not discuss extending its stimulus scheme, but analysts suggested the Bank would have to act sooner rather than later to support the eurozone.

Jennifer McKeown, senior European economist at Capital Economics, said it "will need to announce further policy stimulus before long".

Nick Kounis, head of macro and financial markets research at ABN Amro, said: "If the ECB waits too long, markets could get nervous."

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