ECB Keeps Rates Unchanged in July


In its July meeting, the ECB decided to keep its main interest rate unchanged at a record low 0.5% for the second straight month, after a 25 basis points cut in May. Political tensions arising in Portugal and Greece have pushed bond yields up across the region and pressure President Draghi to stick to loose monetary policy.

Excerpt from the statement by Mario Draghi, President of the ECB:

Incoming information has confirmed our previous assessment. Underlying price pressures in the euro area are expected to remain subdued over the medium term. 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. Monetary and, in particular, credit dynamics remain subdued.

Monetary policy stance will remain accommodative for as long as necessary. The Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time. This expectation is based on the overall subdued outlook for inflation extending into the medium term, given the broad-based weakness in the real economy and subdued monetary dynamics. 

The risks surrounding the economic outlook for the euro area continue to be on the downside. The recent tightening of global money and financial market conditions and related uncertainties may have the potential to negatively affect economic conditions. Other downside risks include the possibility of weaker than expected domestic and global demand and slow or insufficient implementation of structural reforms in euro area countries.

The Governing Council notes the initiatives taken by the European Council of 27-28 June 2013 in the areas of youth unemployment, investment and financing of small and medium-sized enterprises, as well as the European Council’s endorsement of the country-specific recommendations of the 2013 European semester. The Governing Council stresses that implementation of these recommendations is essential to contribute to a sustainable recovery in the euro area.

ECB Keeps Rates Unchanged in July


ECB | Nuno Fontes | nuno@tradingeconomics.com
7/4/2013 1:52:01 PM