Eurozone Improvement Means ECB Set To Leave Rates
By DAVID McHUGH
FRANKFURT, Germany (AP) â¿¿ European Central Bank head Mario Draghi says the eurozone's economic recovery remains fragile and has a long way to go before the bank raises interest rates from their current record low.
The ECB Thursday kept its main interest rate unchanged at the record low of 0.5 percent. Recent figures show the 17 European Union member countries that use the euro are only slowly recovering from an 18-month recession.
Draghi told reporters Thursday after the monthly meeting of the ECB's governing council that the recovery â¿¿ a modest 0.3 percent in the second quarter after six quarters of decline â¿¿ was still too weak to warrant any change in policy."I am very, very cautious about the recovery," Draghi said. "I can't share enthusiasm. The shoots are very, very green." This caution was also reflected in the ECB's adjustment of its growth forecast for the eurozone for this year to minus 0.4 percent, up from minus 0.6 percent. However, the ECB trimmed its forecast for next year by one-tenth of a point to 1.0 percent. The ECB head was at pains to reinforce the bank's stance that it will keep rates at the current low level or even lower for an extended period until the recovery is on stronger footing. Lower rates can stimulate growth. While the U.S. Federal Reserve is already talking about phasing out some stimulus efforts, the ECB is emphasizing that it is nowhere near that point. Draghi said that a rate cut was talked about at the bank's monthly policy meeting and that some council members felt the recovery is "still too green to exclude this discussion." Unemployment in the eurozone remains high at 12.1 percent and the region's businesses still aren't willing to risk more borrowing to expand. Draghi has stressed the bank's low-rate stance in part because it seems not all financial market participants believe in the bank's stance.
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