Thursday, September 5, 2013

ECB maintains refinancing rate at 0.5 percent

    The European Central Bank (ECB) maintained its benchmark refinancing rate at 0.50 percent, along with its other main rates; the marginal lending facility rate at 1.0 percent and 0.0 percent for deposits.
    As normal, the president of the ECB, Mario Draghi, will comment on the decision by the ECB's monetary council at a news conference later today.
    In July the ECB introduced so-called forward guidance, saying its monetary policy stance would remain accommodative "for as long as necessary" and that it expects to keep policy rates at the present or lower levels for "an extended period of time."
   It has not defined what it means by extended period.
    The euro zone economy has started to slowly improve with Gross Domestic Product growing by 0.3 percent in the second quarter, the first quarterly expansion since the third quarter of 2011. But on an annual basis, GDP still shrank by 0.5 percent in the second quarter, the sixth quarterly contraction in a row.
    The ECB has said it expects the economy to gradually recover this year and into 2014. The central bank for 17 nations that share the euro currency, has forecast GDP will shrink 0.6 percent this year.
    The euro zone unemployment rate has remained unchanged at 12.1 percent for the last six months in a row while inflation eased to 1.3 percent in August, down from 1.6 percent.
    The ECB targets inflation of below but close to 2.0 percent and last cut the refinancing rate by 25 basis points in May.
    Despite the improvement, data from July showed that lending to the private sector contracted further, especially in the periphery, such as Spain.


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