ECB To Leave Rates, Reassure No Exit From Stimulus
By DAVID McHUGH
FRANKFURT, Germany (AP) â¿¿ European Central Bank President Mario Draghi is likely to stress Thursday that the bank is still a long way from following the U.S. Federal Reserve and contemplating phasing out stimulus.
Economists expect the ECB to leave its benchmark interest rate for the 17 European Union countries that use the euro unchanged at a record low of 0.5 percent when its 23-member council meets at its headquarters in Frankfurt, Germany.
Instead of cutting rates, the ECB is expected to try and sooth Europe's markets ruffled by the Fed's message that it could start scaling back its bond purchases this year â¿¿ and end them in 2014 â¿¿ if the stronger U.S. economy keeps growing.The Fed's bond-buying program â¿¿ known as quantitative easing â¿¿ and its low interest rates had been sending money flowing into stocks and bonds for months. So when the Fed Chairman Ben Bernanke signaled its potential reversal, prices fell across many markets. In particular, indebted eurozone countries Spain and Italy briefly faced higher borrowing costs rise as the prices of their bonds dipped. Draghi and other members of the bank's leadership have been at pains to point out that they are on a different track from the Fed and any exit is "distant". "Unlike the Fed, however, it is clearly too early for the ECB to signal a shift in its monetary policy stance," Berenberg Bank economist Christian Schulz wrote in a research note. "ECB President Draghi will use the press conference to reassure banks and markets that there is a (unanimous?) ECB consensus" that rates will stay low and credit to banks easily available. Analysts and investors will also be scrutinizing Draghi's words at his post-meeting news conference for any sign of new stimulus. The eurozone could use a boost; its economy shrank 0.2 percent in the first quarter, the sixth straight decline in a row. Unemployment is at 12.2 percent.
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