The president of European Central Bank Mario Draghi on Thursday, announced the union has decided to keep interest rates at record lows and maintained the same size of bond buying program, while monitoring to see how fresh stimulus measures announced affect the economy.
The benchmark rate was left at zero, while deposit at minus 0.4 percent and asset purchases at 90 billion dollars a month.
The union has been battling to meet two percent inflation target since global economic slowdown impact its manufacturing sector amid heightened political uncertainty. Last month, when officials cut rates, expanded monthly bond purchases and announced a new long-term loan for banks, Draghi said policy makers will do even more if needed to arrest current situation. Hence, the continuation of low interest rates that have attracts critics from some of the 25-member Governing Council, especially German Finance Minister Wolfgang Schaeuble.
Others have said “Draghi has to communicate that the ECB has responded forcefully to the downside risks, but it’s going to take time for recent policies to be implemented and to evaluate their effectiveness,” Nick Matthews, head of European economic research at Nomura International Plc in London, said before the announcement. Because his critics have become more vocal, Draghi also needs to offer reassurance “that the ECB will continue to do whatever is needed to meet its mandate.”
But as the U.K. June 23 referendum on whether to stay in the European Union draw nearer, political uncertainty cloud the region’s economic outlook and could cause financial volatility that weakens the transmission of ECB policy.
