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| ECB keeps interest rate at 0.25% despite deflation fear | ECB keeps interest rate at 0.25% despite deflation fear |
| (35 minutes later) | |
| The European Central Bank (ECB) has kept its benchmark interest rate at 0.25%. | The European Central Bank (ECB) has kept its benchmark interest rate at 0.25%. |
| The bank last cut rates to a record low in a surprise decision in November. | The bank last cut rates to a record low in a surprise decision in November. |
| Inflation in the eurozone region slowed to 0.7% in January from 0.8% in December. | Inflation in the eurozone region slowed to 0.7% in January from 0.8% in December. |
| Despite fears of deflation in the eurozone, the bank believes the economies of the 18 countries in the zone are recovering after the bloc emerged from recession last summer. | Despite fears of deflation in the eurozone, the bank believes the economies of the 18 countries in the zone are recovering after the bloc emerged from recession last summer. |
| At a press conference to explain the decision, Mario Draghi, President of the European Central Bank said: "We have to dispense with this idea of deflation. The question is - is there deflation? The answer is no. There is going to be a low level of inflation for a protracted period of time, but deflation? No. | |
| "The modest recovery is showing encouraging signs. The demand side is getting stronger, not weaker. We have to treat the recovery with extreme caution. It is very fragile. It is starting from very low levels but it is proceeding." | |
| On Wednesday, Markit's Eurozone Composite Purchasing Managers' Index indicated that growth in the private sector last month was its strongest for two and a half years. | On Wednesday, Markit's Eurozone Composite Purchasing Managers' Index indicated that growth in the private sector last month was its strongest for two and a half years. |
| In addition to holding its benchmark rate at 0.25%, the ECB also left unchanged the rate it pays on bank deposits at zero, | |
| Holger Schmieding, chief economist at Berenberg Bank, believes the : "Prices are stable. Leading economic indicators are close to trend. | |
| "The European Commission's Sentiment Index is at 100.9 which is actually a little bit above trend. So the recovery is happening. Draghi should have acted earlier, but belatedly, the recovery is on track." | |