The European Central Bank has kept interest rates unchanged at a record low 0.25 percent, even though inflation in the eurozone has fallen to its lowest in more than four years.
ECB President Mario Draghi said there will be no economic stimulus for now, despite the urgings of some economists, including those at the International Monetary Fund (IMF).
But Draghi did not rule out future action: “Looking ahead, we will monitor developments very closely and we will consider all instruments available to us.”
“The (ECB) Governing Council is unanimous in its commitment to using also unconventional instruments – within its mandate – in order to cope effectively with risks of a too prolonged period of low inflation,” he added.
Some economists have expressed concern that the eurozone risks slipping into a spiral of sinking prices and meagre growth.
But the bank said the annual inflation rate in March – which fell to 0.5percent – came from softer food and energy prices, something which it considers to be temporary.
It was the lowest inflation level since the economy was deep in recession in 2009, and the sixth month in what Draghi has described as “the danger zone” below 1.0 percent.
Draghi said the rate is expected to rise close to its 2.0 percent target at the end of next year.
“Thanks to generous IMF”
The central bank head also questioning the timing of the IMF’s most recent comments.
“The IMF has been of recent extremely generous in its suggestions on what we should do or not do, and we are really thankful for that,” Draghi said.
“Frankly, I would like the IMF to be as generous as they have been towards us also with other monetary policy jurisdictions, like for example issuing statements just the day before a (U.S. Federal Reserve) meeting would take place,” he said.
IMF Managing Director Christine Lagarde on Wednesday called on the ECB to ease monetary policy to move prices higher, saying “lowflation” in advanced economies risked undercutting an already sluggish global recovery.
Deposit rate unchanged
The ECB also made no adjustment to the rate it pays to retail banks when they leave money on deposit with it overnight – it remains at zero.
In recent weeks, Governing Council members have been willing to publicly talk about the possibility of cutting deposit rates below zero – effectively charging banks to hold cash with the ECB, thereby making it more likely that money will be loaned out to businesses or individuals.
They have also spoken about the possibility of embarking on bond purchases as the United States, Japan and Britain have, if the threat of deflation became more acute.
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