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European Central Bank maintains record low interest rate

The European Central Bank (ECB) has kept its interest rate at a record low of 0.5% in anticipation of recovery in the Eurozone.

On Thursday ECB voted to maintain the interest rate after economic information improved last month, when the bank slashed the rate from 0.75%.

In a press conference, Mario Draghi, president of the ECB commented: “Incoming information has confirmed our assessment which led to the cut in interest rates in early May.

“The underlying price pressure in the euro area is expected to remain subdued over the medium term. In keeping with this picture, monetary and, in particular, credit dynamics remain subdued.

“Medium-term inflation expectations for the euro area continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2%. At the same time, recent economic sentiment survey data have shown some improvement from low levels.

“Against this overall background, our monetary policy stance will remain accommodative for as long as necessary.

“In the period ahead, we will monitor very closely all incoming information on economic and monetary developments and assess any impact on the outlook for price stability.”

Mr Draghi said output in the Eurozone has fallen for six quarters in a row, while labour market conditions continue to be weak, although economic sentiment has made slight improvements from very low levels.

Further improvements are expected for the year ahead and 2014, with export demand growing across the globe.

ECB suggested domestic demand should be bolstered by the “accommodative stance” of their monetary policy.

Mr Draghi concluded: “It is essential that euro area countries do not unravel their efforts to reduce government budget deficits.

“The new European governance framework for fiscal and economic policies should be applied in a steadfast manner.

“Structural reforms should, in particular, target competitiveness and adjustment capacities in labour and product markets, thereby helping to generate employment opportunities in an environment of unacceptably high unemployment levels, especially among young workers, prevailing in several countries.

“Combined action on the fiscal and structural front should mutually reinforce fiscal sustainability and economic growth potential and thereby foster sustainable job creation.”

This was posted in Bdaily's Members' News section by Miranda Dobson .