ECB Leaves Rates on Hold

At its July 3rd meeting, the European Central Bank left its key refinancing rate on hold at 0.15 percent, following last month’s cut, despite persistently low inflation.
Joana Taborda | 7/3/2014 1:50:49 PM
The interest rates on the marginal lending facility and the deposit facility were also left unchanged at 0.40 percent and -0.10 percent respectively.

In June, Euro Area annual inflation rate is expected to be 0.5 percent, the same as recorded in May and well below the 2 percent ECB target. The unemployment rate was also steady in May at 11.6 percent. 

Extracts from the Introductory statement to the press conference by Mario Draghi, President of the ECB,

Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. The latest information signals that the euro area economy continued its moderate recovery in the second quarter, with low rates of inflation and subdued monetary and credit growth. At the same time, inflation expectations for the euro area over the medium to long term continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2%. The combination of monetary policy measures decided last month has already led to a further easing of the monetary policy stance. The monetary operations to take place over the coming months will add to this accommodation and will support bank lending. As our measures work their way through to the economy, they will contribute to a return of inflation rates to levels closer to 2%. Concerning our forward guidance, the key ECB interest rates will remain at present levels for an extended period of time in view of the current outlook for inflation. Moreover, the Governing Council is unanimous in its commitment to also using unconventional instruments within its mandate, should it become necessary to further address risks of too prolonged a period of low inflation. We are strongly determined to safeguard the firm anchoring of inflation expectations over the medium to long term.

As a follow-up to the decisions taken in early June, the Governing Council today also decided on specific modalities for the targeted longer-term refinancing operations (TLTROs). The aim of the TLTROs is to enhance the functioning of the monetary policy transmission mechanism by supporting lending to the real economy. A press release on the modalities for the TLTROs will be published today at 3.30 p.m. As announced last month, we have also started to intensify preparatory work related to outright purchases in the ABS market to enhance the functioning of the monetary policy transmission mechanism.

ECB Leaves Rates on Hold