Bank of England and ECB hold rates unchanged
FRANKFURT, Germany — The president of the European Central Bank expressed satisfaction Thursday with efforts to resolve the eurozone crisis, saying that members of the currency area had made “amazing” progress toward reducing government spending.
While pessimistic on the immediate outlook for economic growth on the Continent, Mario Draghi, the central bank president, pointed to a number of indicators of reduced tension in financial markets, including a return of U.S. money market funds to the region and successful bond sales by Portugal and Ireland.
“Fiscal consolidation that has taken place all over the eurozone is amazing,” Draghi said after the ECB joined the Bank of England in leaving its main interest rate unchanged. “All this poises the euro area for a recovery that is probably going to be slow but is also going to be solid.”
At the same time, Draghi seemed to leave the door open for a rate cut or other measures to stimulate growth in coming months, without committing to one. He said that inflation would probably fall below the ECB’s target of about 2 percent next year, and signaled that next month the central bank was likely to revise downward its forecasts for eurozone growth.
At its regular monthly monetary policy meeting, the central bank’s Governing Council left its benchmark interest rate at 0.75 percent, an all-time low.
“As expected, the ECB kept its powder dry,” Carsten Brzeski, an economist at ING Bank, said in a note to clients.
The British central bank, the Bank of England, also kept its benchmark rate at 0.5 percent, a record low, and left its bond-purchasing stimulus program at 375 billion pounds, or $600 billion, after the British economy emerged from a double-dip recession in the third quarter.
The economy grew 1 percent in the third quarter, its strongest quarterly growth since the global financial crisis started in 2008. But growth was helped by Olympic ticket sales, and some economists said the outlook remained gloomy.
“The big picture is that it’s going nowhere, really,” said Vicky Redwood, economist at Capital Economics. “Output is essentially stagnating. It’s a pretty dismal picture.”
Draghi’s appearance at a news conference Thursday came just more than a year after he became ECB president. Draghi said that the central bank’s measures like unlimited, low-cost loans to banks had helped eliminate the risk that some banks would run out of cash.