European central bank keeps rates unchanged

The ECB left its interest rates unchanged as expected, on Sept 8, 2016.
The ECB left its interest rates unchanged as expected, on Sept 8, 2016. PHOTO: REUTERS

FRANKFURT (REUTERS) - The European Central Bank left interest rates unchanged as expected on Thursday and maintained the key parameters of its 1.74 trillion euro (S$2.62 trillion) asset buying programme as it seeks to revive growth and inflation.

Facing high unemployment, weak growth and the threat of deflation, the ECB has provided extraordinary stimulus in recent years, cutting interest rates deep into negative territory and pushing the cost of credit to all-time lows, hoping to jump start growth.

But inflation is still barely above zero and will hold below the ECB's 2 per cent target for years to come, supporting calls for even more central bank policy easing.

Repeating its forward guidance, the ECB added that it continues to expect its key interest rates to remain at present or lower levels for an extended period of time and well past the horizon of the net asset purchases.

It also said that its 80 billion euro per month asset purchase programme is intended to run until the end of March 2017, or beyond if necessary, and until the bank sees a sustained adjustment in the path of inflation consistent with its inflation aim.

At Thursday's meeting, the ECB kept its rate on bank overnight deposits, which is currently its primary interest rate tool, at -0.40 per cent.

The main refinancing rate, which determines the cost of credit in the economy was unchanged at 0.00 percent while the rate on the marginal lending facility - or emergency overnight borrowing rate for banks - remains at 0.25 percent.