ECB Faces Sluggish Economy With Rates Already Low
FRANKFURT, Germany (AP) â¿¿ The European Central Bank has left its key interest rate unchanged at a record low of 0.75 percent, holding off on providing further stimulus to the lagging economies of the 17 countries that use the euro currency.
The bank's governing council made the decision Thursday at a meeting in Brdo Pri Kranju, Slovenia.
A rate cut could in theory provide a boost for the eurozone's economy. But rates are already low, and bank officials have questioned how much a further cut would help right now.
Additionally, inflation has remained stubbornly above the bank's goal of just under 2 percent, coming in at an annual 2.7 percent in September due to oil prices and higher taxes in some countries. That is also grounds for caution in cutting rates further, since low rates can sometimes worsen inflation.The Bank of England also kept its key interest rate unchanged at a record low 0.5 percent. Markets across Europe were broadly unchanged following the rate decision with the Stoxx 50 index of leading European shares rising one point following the announcement to 2,543. The euro was also steady against the dollar at $1.2952. Attention was expected to shift to the ECB President Mario Draghi's news conference. The bank has already taken steps to bolster the eurozone during its crisis over too much government debt. At last month's meeting, it said it could buy unlimited amounts of short-term bonds issued by countries with heavy debts â¿¿ such as Spain and Italy â¿¿ so long as they took steps to reduce their deficits. Such bond purchases would lower the interest rates countries pay when they sell new bonds â¿¿ which they must constantly do in order to pay off old bonds. The lower rates would save governments money and help convince bond investors they will be able to keep paying off their debt.
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