ECB keeps rates unchanged, euro sees an uptick

Even as the region faces anemic inflation rates, the ECB decided to leave rates unchanged saying it will make a decision at its next meeting in June.

By Ananth Baliga

BRUSSELS, May 8 (UPI) -- The European Central Bank kept interest rates unchanged and didn't announce any further easing measures given the anemic pace of inflation in the region.

European Central Bank President Mario Draghi said Thursday the ECB will decide on further measures to push up inflation when the governing council meets next in June. The announcement brought the euro around 0.3 percent against the dollar, pushing it close to a two-and-half year high.


"There is a consensus in not being resigned to this, which would lead to a consensus about action," Draghi said. "The governing council is comfortable with acting next time."

Annual inflation in the region was 0.7 percent in April, slightly higher than March but still far from the EBC's 2 percent target for the medium term. Draghi said inflation was likely to stay close to the current levels before rising in 2015 and reaching the central bank's target in 2016.

Draghi did say the increasing strength of the euro was not helping, as it was pushing down inflation, calling it a "cause for serious concern."

ECB officials have insisted there is no evidence of sustained drops in consumer prices, a sign of deflation, as lower consumer prices have generated concern from certain organizations. The Organization for Economic Cooperation and Development, a Paris-based group of rich countries, on Tuesday urged the ECB to cut rates.


"In particular, we call on the European Central Bank to take new policy actions to move inflation more decisively toward target and to be ready for additional nonconventional stimulus if inflation were to show no clear sign of returning there," said Rintaro Tamaki, the OECD's acting chief economist.

Apart from lowering rates, the ECB has other measures it could take to increase inflation. It could start charging banks for keeping overnight deposits with them by cutting its deposit rate, now at zero, into negative territory, or they could initiate an asset-buying program, like the U.S. Federal Reserve, to spur lending to the private sector.

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