Monday 26 February 2018

ECB holds rates at record low, assesses deflation risk

European Central Bank President Mario Draghi
European Central Bank President Mario Draghi

The European Central Bank left interest rates unchanged today, holding off fresh policy action to combat the threat of deflation while it waits for new staff forecasts next month.

The decision to leave rates on hold was expected by most economists as the bank awaits updated economic projections from its staff next month. A downward revision to the inflation outlook then could prompt a policy move.

The ECB held its main interest rates at 0.25pc. It also left unchanged the deposit rate it pays on bank deposits at 0.0pc, and held its marginal lending facility - or emergency borrowing rate - at 0.75pc.

The central bank cut rates last November after euro zone inflation tumbled to 0.7pc in October. Inflation again slowed to 0.7pc in January, making next month's new forecasts of crucial importance.

The ECB targets inflation of just below 2pc and is wary of it getting stuck in a "danger zone" below 1pc.

Meanwhile, the Bank of England also left rates unchanged.


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