European Central Bank keeps interest rates at record low

The European Central Bank (ECB) on Wednesday confirmed its key interest rates would remain unchanged and at a record low amid growing uncertainty about the eurozone's economic outlook.

The Frankfurt-based bank's benchmark refinancing rate has now been at zero for more than three years, after steadily and swiftly dropping there in the aftermath of the 2007/8 great recession and the eurozone debt woes that followed. 

The ECB also announced that it was holding its deposit rate at minus 0.4% and the marginal lending rate at plus 0.25%.

In a statement, the bank's 25-member governing council said it expects key ECB interest rates to remain at their present levels at least through the end of 2019 to ensure inflation remains roughly in line with the bank's annual target of just below 2%.

The lender had been planning to raise the rates in the course of 2019, but has been dissuaded by forecasts of far slower global and European growth.

Risks due to uncertainties

Speaking at a press conference in Frankfurt following a meeting on Wednesday, ECB chief Mario Draghi warned of the risks affecting growth in the eurozone, describing current economic indicators as "weak."

"The risks surrounding the euro area growth outlook remain tilted to the downside, on account of the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets," said Draghi in Frankfurt.

Draghi said the consequences of Brexit would be different depending on "whether it is a hard disorderly Brexit or whether it is properly managed with an adequate transition period." 

"They are having votes every day [in the British parliament] so it would not be right to anticipate one thing or another," he said.

"What is clear however — the whole discussion on Brexit, which has lasted now many years, really, is part and parcel of the overall uncertainty that is hanging over our continent and I think is hanging over the UK as well," he added.

Little risk of recession

However, the ECB chief echoed the International Monetary Fund's (IMF) projection for the Eurozone, saying there was currently little risk of recession.

On Tuesday the IMF cut its forecast for global growth this year to 3.3% from 3.5%.

As well as Brexit and the possible disruption of flow of goods, slowing trade is one reason for the cut, with business confidence having been hurt by uncertainty over whether the US and China will settle their trade disputes or add more tariffs on goods.

The ECB took several steps to support the economy on March 7, including extending the date for the earliest interest rate increase to the end of the year and a promise of a new round of cheap loans for banks to help boost their ability to lend to businesses and support growth.

law/msh (AP, dpa)

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