ECB keeps interest rates at record lows

ECB keeps interest rates at record lows

Thu Oct 20, 2016 6:6PM

The European Central Bank (ECB) has announced that it will keep its interest rates at record lows. The ECB also reaffirmed plans to maintain its quantitative easing program at €80 billion to March 2017 or beyond if needed.

This came as investors were closely watching to see if the ECB would extend the program, or wind it down. Nevertheless, the decision to keep the interest rates unchanged was expected.

The stimulus scheme, known as quantitative easing (QE), involves the purchase of public and private bonds at the rate of €80 billion per month, and is currently set to end in March 2017.

The ECB chief Mario Draghi insisted that “low rates have worked” to make borrowing easier for households and businesses in the 19-nation euro area, AFP reported.

Both announcements showed immediate effects on markets in the currency bloc.

In the eurozone’s main markets, Frankfurt and Paris initially slipped as Draghi spoke but then rose closing up 0.52 percent and 0.44 percent respectively.

London meanwhile finished the day little changed, up a mere 0.07 percent.

Investors are now looking to December which offers the luxury of the latest economic projections that will assist in deciding just how far to extend the QE program and whether any additional, or less, stimulus is needed.

Many analysts think more stimulus is needed as growth and inflation remain lackluster in the eurozone, AFP added.

Draghi further said that the next meeting on 8 December “will define the coming months” as he warns the eurozone is subject to “downside risks”, the Financial Times reported.

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