European Central Bank keeps interest rates unchanged
- 22nd January 2016
- Accountancy & Finance
The Eurozone's interest rates remain unchanged after the European Central Bank (ECB) decided to keep them at 0.05% at its latest meeting.
The decision was widely expected, as was the choice to leave the overnight deposit rate at -0.3% after its change last December.
There is some speculation that the ECB will make more moves aimed at stimulating the eurozone economy later in the year as inflation is currently running at 0.2%. The ECB's target inflation rate is close to, but below, 2%.
As recently as September, the inflation rate in the eurozone was actually below zero, which means that in effect prices across the board were actually falling. This situation came about mainly due to the decreases in global oil prices.
With crude oil on the world markets continuing to fall in value since, and extra pressures from the continuing difficulties the economy in China is facing, prospects for inflation to creep up towards the ECB's target look unlikely.
ECB president Mario Draghi previously said that eurozone inflation was expected to reach 1% in 2016, but this projection was based on the ECB’s own forecasts that oil prices would average more than $50 a barrel this year.
Currently, the price stands at below $30, and with sanctions being lifted from Iran, it looks likely that even more oil will soon be on the market, driving values down even further.
The ECB had extended its monthly €60bn stimulus programme in December by six months to March 2017 and now faces the prospect of having to extend it further.
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