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No interest rate change for eurozone and Britain


economy

No interest rate change for eurozone and Britain

The European Central Bank has left the cost of borrowing in the eurozone at a record low.

The decision to hold the main rate at 0.25 percent was widely expected.

ECB President Mario Draghi and his fellow policymakers are still assessing whether they need to respond to concerns about deflation, which were sparked by inflation slowing in December.

Economic recovery, while weak, is proceeding as the ECB has expected, giving it time to see whether inflation picks up.

The bank is also concerned about a lack of lending by banks to businesses and individuals.

Lending to companies in the bloc shrank at the fastest pace on record in November and the difference in corporate loan costs around the bloc grew. This suggests the ECB’s low rates are still not filtering into all countries.

Last month, Draghi said the ECB would ensure that any new long-term central bank money flowed to the real economy instead of being used by banks to buy government bonds.

At the same time the Bank of England has left its monetary policy unchanged.

Britain’s central bank is sticking to its plan to keep interest rates at a record low of 0.5 percent until the surprisingly fast economic recovery there broadens out.

It also left its stimulus programme of buying government bonds unchanged at 375 billion pounds (453 billion euros) per month.

Britain moved from being a laggard to a leader in terms of growth among the world’s biggest economies last year.

Its economy is expanding by more than three percent in annualised terms although there are concerns the recovery could prove unsustainable, especially as wage growth remains weak.

The pace of Britain’s recovery has helped the pound to strengthen by five percent against the euro and 10 percent against the dollar since the middle of last year.

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