ECB leaves
interest rates unchanged
Aug 7th 2014
Today
the investors and the market attention turned to the outcomes of the central
banks meetings and Mario Draghi press conference..
The
ECB kept the key interest rates unchanged amid geopolitical uncertainties occurring
around the world as it was widely expected.
In June, the ECB cut its benchmark rate from 0.25% to 0.15%, and as many
economists have expected, the ECB holds the interest rates at its lowest level
for the second consecutive month, despite the low inflation rates in Euro area.
Mario Draghi has also claimed that the
key interest rates is expected to remain at current lower levels fro an
extended period of time.
In his press conference
following the policy decision, the ECB President Mario Draghi has highlighted
the geopolitical risks (the escalation tensions between Russia and Ukraine, the
strikes in Gaza, Syria and Libya) that have affected the European economy.
For example, Italy, the
eurozone’s third-largest economy, slipped back into recession, in addition the German
factory orders fell to the lowest levels in more than two years amid the
intensifying crisis in Ukraine, especially after imposing anti-Russian economic
sanctions by the West.
Furthermore, the latest
euro zone inflation figures showed the inflation rate dropped to 0.4% in July,
which was the lowest rate since October
2009 , also it remains far from the ECB's target to hit 2%.
Also according to the
International Monetary Fund (IMF): the European economic growth could be
affected negatively by the slowing
economic growth in Russia
due to the Western sanctions.
As a result, like the
BoE, the ECB has maintained the interest
rates unchanged as the recent figures from Europe were negative and the Euro
area economy can be vulnerable to new
recession, by the contrast to the US
economy that showed a significant improvement during the second quarter of this year which may push the Fed to hike
the interest rates sooner than expected.
