Brussels, 01/08/2013 (Agence Europe) - The head of the European Central Bank, Mario Draghi, broke with tradition on 1 August by announcing plans for the future, stating that, as long as the current situation of moderate inflation forecasts for the eurozone continues, the ECB will keep interest rates low.
At the ECB Governing Council meeting of 1 August, it was decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.50%, 1.00% and 0.00% respectively.
Draghi explained: “Incoming information has confirmed our previous assessment. Underlying price pressures in the euro area are expected to remain subdued over the medium term. In keeping with this picture, monetary and, in particular, credit dynamics remain subdued. Inflation expectations for the euro area continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. At the same time, recent confidence indicators based on survey data have shown some further improvement from low levels and tentatively confirm the expectation of a stabilisation in economic activity”.
On the proposal to publish the Governing Council's minutes, Draghi said the Governing Council said it would be wise to have wider communications and explain the reasons for its decisions, but it was very important that any change did not jeopardise the independence of the Governing Council's members. He added that the ECB's Executive Board would submit a proposal to the Governing Council in this connection in the autumn.
On monetary policy, Draghi said the bank expected the ECB interest rates to remain at their current levels, or lower, for an extended period, but stressed that a detailed timeline had not been put in place.
Draghi said that the labour market remained weak and, for the reminder of 2013 and for 2014, growth in the eurozone is expected to benefit from a gradual improvement in global demand. He said business in the eurozone would stabilise and slowly pick up and the risks surrounding future prospects for the eurozone economy continue to be on the downward side.
The ECB has welcomed the Cypriot authorities' decision to conclude resolution of the Bank of Cyprus (BoC), commenting: “The finalisation of this process is a major step toward restoring confidence in the domestic banking system”. (LC/transl.fl)