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Market Update

ECB Holds Record Low Rate and Estimates Higher Inflaiton


Author: Nigel Thomas
ticker.com
Last Update: 12:20 PM ET March 06 2014

European Central Bank left its key lending rate on hold at a record low of 0.25% and the central bank is running out of options to stimulate the economy further.

President Mario Draghi of the European Central Bank said after the decision in a news conference that the euro zone economy is recovering at a “moderate” pace.

Draghi added that the euro zone is likely to see a prolong period of low inflation and that the central bank plans to leave its interest rate low for an extended period.

The central bank also forecasted that the annual inflation rate would gradually rise from 0.8% to 1.5% in 2016. The bank also estimated the inflation to pick up to 1.6% rate in the final quarter of that year.

The ECB is not likely to repeat the Federal Reserve plan of purchasing government or corporate bonds.

The European corporations rely more on bank loans and less on bonds and The Bundesbank in Germany is opposed to any government bond purchase.

Separate reports from the region also supported the argument for another rate cut. German factory orders rose 1.2% in January from December. French unemployment in December quarter declined to 9.8% from 99%.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc