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Economy

ECB holds interest rates steady; Mario Draghi doesn’t expect increase this year

Mario Draghi

The European Central Bank kept interest rates steady for the region, with President Mario Draghi adding that an interest rate hike this year is unlikely.

The central bank's governing council kept the interest rate on the main refinancing operations of the eurosystem — which provides the bulk of liquidity to the banking system — at zero. It kept the marginal lending facility, which provides overnight credit for banks, at 0.25%; and the interest rate on the deposit facility, used by banks to make overnight deposits, was held at -0.4%.

The ECB also reiterated its expectation that these key interest rates will remain at their current levels for an extended period of time and well beyond the horizon of its net asset purchases. The central bank makes monthly asset purchases of €30 billion ($36.7 billion), which is intended to continue until the end of September.

Mr. Draghi said at a news conference to announce the decisions of the governing council that based on data today, "I see very few chances that interest rates could be raised at all this year."

Mr. Draghi also acknowledged exchange rate volatility and said the governing council had identified three causes for this and an upward move in the expected path of short-term interest rates: improvements in the economy, "heightened market sensitivity to perceived changes in our communication," and the use of language in discussing exchange rates that doesn't reflect what has been agreed.

In an opening statement Mr. Draghi added that, in order to reap the full benefits of the ECB's monetary policy measures, other policy areas must contribute to strengthening the longer-term growth potential of the region and reducing vulnerabilities.