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ECB talks about cutting interest rates but doesn't


ECB talks about cutting interest rates but doesn't


The European Central Bank has held off cutting the cost of borrowing in the eurozone – for now.

For the eighth straight month the benchmark interest rate remains at 0.75 percent. Some economists had predicted a reduction to 0.5 percent because of last week’s inconclusive Italian election.

The political deadlock there has pushed the cost of borrowing higher for vulnerable eurozone countries and fuelled concerns that the region’s debt crisis could roar back to life.

But ECB President Mario Draghi said the markets had settled and contagion prospects were muted.

“You have seen certainly that the contagion to other countries has been muted this time, contrary to what might have happened about a year and a half ago. And this is another positive sign,” he said.

Bank policymakers did discuss cutting rates, but decided to keep them on hold, citing positive indicators from recent economic surveys.

Draghi signalled that some members of the ECB’s Governing Council had been in favour of such a move, but gave no strong hint that further easing was on the cards and that pushed the euro up against the dollar.

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