ECB leaves interest rates unchanged

          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.

MBCFX Forex & CFDs Brokerage Firm