ECB leaves rates unchanged
April 21, 2016
The ECB announced Thursday it would leave its benchmark refinancing rate on hold at zero percent.
At a press conference later in the day, ECB President Mario Draghi drove home once again his case for ultra-loose monetary policy amid mounting criticism from Germany. He said the central bank was ready to use "all instruments available" to push up inflation in the euro area.
"The governing council will continue to monitor closely the evolution of the outlook for price stability and, if warranted to achieve its objective, will act by using all the instruments available within its mandate," Draghi told reporters. He added that borrowing costs were to remain at present or even lower levels "for an extended period of time."
He also announced the ECB would begin the purchase of corporate bonds in June of this year. Draghi brushed aside criticism of the ECB's current monetary policy, saying "the ECB obeys law, not politicians."
Last week, German Finance Minister Wolfgang Schäuble warned that the ECB's policy was causing "extraordinary" problems for Germany and was in part to blame for the rise of the right-wing anti-immigration Alternative for Germany (AfD) party.
On Wednesday, Schäuble stuck to his tough stance, saying that "a long period with zero and negative interest rates is not a sensible situation."
The ECB has been easing policy aggressively, cutting rates deeper into negative territory and expanding asset buys in a bid to prop up inflation, which now stands at zero - far off its 2-percent target.
Negative rates are hurting Germany's fragmented and cash-saturated banking system disproportionately, raising the prospect that hundreds of smaller banks, primarily small savings banks, could become unviable.
IMF figures suggest German and Portuguese banks will take the biggest earnings hit from falling interest rates, compressing margins and possibly thwarting lending growth.
The ECB president had made it clear earlier he wanted to see how the two stimulus packages announced since December played out before unveiling any new measures.
uhe/hg (Reuters, dpa, AFP)