Brussels, 06/02/2014 (Agence Europe) - The European Central Bank's Governing Council decided on Thursday 6 February to keep interest rates unchanged at 0.25% for refinancing, 0.75% for the marginal loan facility and 0% for the deposit facility. The ECB decided to keep interest rates unchanged due to the complexity of the situation and the need for more information.
On the question of whether there is deflation the eurozone, Mario Draghi, the head of the ECB, said the answer was no. He stated at the monthly press conference that the eurozone was going through an extended period of low inflation but it will gradually rise but remain below 2%. This is due to rising energy costs, along with high unemployment and low demand. “When I say we foresee low inflation, that is subject to the information we've got now” and we'll see what future information suggests, he said, noting that the macroeconomic forecasts to be published in March will contain forecasts for the year 2016 for the first time.
Draghi said he was aware of the risks inherent in a long period of low inflation and said the ECB was prepared to take action using the instruments available to it that are allowed under the EU treaties. The instrument to be used would depend on the situation. The ECB would act in two cases - an undesired contraction of the money markets or worsening inflation forecasts.
Credit flows to banks have stabilised, but remain low and the asset quality reviews may hurt lending, but will help in the medium to long term, said Draghi.
Commenting on the turbulence on emerging economy markets, Draghi said this was outside the control of the ECB and the ECB was showing signs of bearing up very well. Finally, on the agreement with Ireland over promissory notes (to extend the duration of the loans for the bailout of Anglo Irish Bank), he said: “We are collecting the necessary information and the assessment will be known in due time after completion”. (EL/transl.fl)