ECB freezes key rates

with analysts saying it is keeping its policy options open following a rate cut last month.

With the eurozone economy still mired in its longest recession ever, the ECB’s governing council voted to keep the bank’s key “refi” refinancing rate steady at an all-time low of 0,50 percent, after cutting rates by a quarter of a percentage point last month.

The central bank also left its other two rates — the deposit rate and the marginal lending rate — at zero percent and 1,0 percent respectively.

Given the proximity of last month’s cut, intended as a much-needed economic shot in the arm with no end to the recession in sight, no analysts or ECB watchers had been expecting the central bank to announce any further policy moves this month.

Further rate cuts

ECB watchers have questioned the effectiveness of rate cuts, arguing that the more pressing issue for the euro area’s economy, hit also by widespread unemployment, is the low level of lending to Europe’s small and medium-sized enterprises.

But analysts said Draghi was unlikely to announce any other non-standard policy measures as its assesses the impact of its recent rate cut.

“After leaving interest rates on hold as expected, the ECB is likely to keep a cautiously open mind to both further rate cuts and measures to stimulate the asset-backed securities market,” said Capital Economics economist Jennifer McKeown.

With the ECB’s deposit rate already at zero, any further monetary policy easing would lead the bank into unchartered territory of negative interest rates and a number of governing council member have expressed concern recently about the potential side effects of such a move. — AFP.