ECB Leaves Interest Rates Unchanged

• ECB Leaves Interest Rates Unchanged

The European Central Bank (ECB) on Thursday kept interest rate unchanged and planned to do so for an extended period, depending on economic outlook.

According to Mario Draghi, the president of the European Central Bank, the institution will maintain its ongoing asset purchasing program of 60 billion euro till December 2017 or beyond if necessary. Signaling weak inflation rate remains a concern for policy makers and prevent ECB from unwinding balance sheet as widely expected.

Also, while the economic growth in the Euro-area remains solid, it is yet to pressure consumer prices towards the apex bank’s 2 percent target. Meaning inflation rate remains subdued across the region.

But “if this continues we stand ready to increase asset purchase program to return inflation rate towards the institution 2 percent target,” Mario Draghi said. Suggesting the apex bank may not reduce or hike rates anytime soon, even with a record low unemployment rate and growing new job creation.

The 0.6 percent growth rate recorded in the second quarter of the year, following a 0.5 percent expansion from the first quarter, validated the broad-based growth of the region and as the global market strengthens the economy will grow further.

Accordingly, ECB revised up the economic growth forecast for 2017 to 2.2 percent from 1.7 percent previously projected. The fastest since 2007.

The apex bank expects core inflation to rise gradually over the medium time. However, domestic cost pressure in labor market is subdued, weighing on prices.

Mario Draghi said structural reforms must be substantially stepped up to augment growth and sustain current progress.