“The European Central Bank kept interest rates on hold as improving economic sentiment underpinned expectations of a gradual recovery this year.
Policy makers meeting in Frankfurt today left the benchmark rate at a record low of 0.75 percent, as predicted by 50 out of 55 economists in a Bloomberg News survey. The deposit and marginal lending rates were also unchanged at 0 percent and 1.5 percent, respectively. ECB President Mario Draghi will hold a press conference at 2:30 p.m. to explain the decision.
Improving confidence indicators have eased pressure on the ECB to reduce rates from a record low, a move fraught with the unknown consequences of possibly pushing the deposit rate below zero. A pledge last year to buy as many government bonds as it takes to stabilize the single currency, buttressed by political progress on bringing economies of the 17 member states closer together, has eased fears the bloc would splinter.
“Risks will always be there but there’s no reason to cut rates,”Marco Valli, chief euro-area economist at UniCredit Global Research in Milan, said before the decision. “Signs of economic stabilization are likely already in the first half of the year, thanks to the latest stabilization in financial markets. We’ll then see a modest recovery.”
