European Central Bank keeps interest rates unchanged

By Muhammed Ali Gurtas

ANKARA

The European Central Bank (ECB) on Thursday decided to keep interest rates steady.

Interest rates on the main refinancing operations were unchanged at 0.00 percent, according to a statement from the ECB's Governing Council.

The bank also did not change interest rates on the marginal lending facility or the deposit facility, standing at 0.25 percent and -0.40 percent, respectively.

Speaking at a press conference, the bank's head Mario Draghi said: "We continue to expect them to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases."

"Regarding non-standard monetary policy measures, we confirm that our net asset purchases, at the current monthly pace of €30 billion, are intended to run until the end of September 2018, or beyond, if necessary," he said. "And in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim."

According to Eurostat, last month consumer prices in the eurozone rose 1.3 percent on a yearly basis.

Among the EA19, an annual drop in consumer prices was seen only in the Greek Cypriot administration, down 0.4 percent, as the lowest hikes in year-on-year inflation were seen in Greece (0.2 percent) and Ireland (0.5 percent), while the highest rises were seen in Estonia (2.9 percent), Slovakia, and Lithuania (both 2.5 percent).

Over the last decade, the highest annual inflation rate in the EU was seen in July 2008, up 4.4 percent. The lowest was in January 2015, at minus 0.5 percent, when prices were in fact dropping.

Risk assessments

"The Eurosystem will continue to reinvest the principal payments from maturing securities purchased under the asset purchase program for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary," Draghi said.

"This will contribute both to favorable liquidity conditions and to an appropriate monetary policy stance."

The ECB head also said the risks surrounding the euro area growth outlook remain broadly balanced, but risks related to global factors, including the threat of increased protectionism, have become more prominent.

"In order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively to raising the longer-term growth potential and reducing vulnerabilities," he said.

Draghi stated that the implementation of structural reforms in euro area countries needs to be substantially stepped up to increase resilience, reduce structural unemployment, and boost euro area productivity and growth potential.

"Against the background of overall limited implementation of the 2017 country-specific recommendations, greater reform effort is necessary in euro area countries," he added.