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ECB keeps interest rate at 0.05% ECB to start asset buying programme
(about 1 hour later)
The European Central Bank has kept its benchmark interest rate at 0.05%. The European Central Bank has kept its benchmark interest rate at 0.05% and given details of its asset purchase programme announced last month.
It is expected to give details of its asset purchase programme announced last month at a press conference later on Thursday. The bank's head Mario Draghi said it would start buying covered bonds this month and other assets in the final three months of the year.
The bank has said it will not be buying government bonds like other central banks have done, but has yet to outline what it will be buying. He said it would continue to buy assets for two years.
The bank is looking to add liquidity to the financial system, boost lending and lift flagging economic growth.The bank is looking to add liquidity to the financial system, boost lending and lift flagging economic growth.
The eurozone economy was stagnant between April and June this year, with the German and Italian economies shrinking, following growth of just 0.2% in the first quarter. Covered bonds are those backed by public sector loans or mortgages.
The bank's rate-setting meeting is taking place in Naples, Italy, where protesters have faced riot police outside the Capodimonti Palace, where ECB head Mario Draghi will hold the press conference. The bank's rate-setting meeting is taking place in Naples, Italy, where protesters have faced riot police outside the Capodimonti Palace, where Mr Draghi is held his press conference.
Protesters expressed anger about austerity measures, unemployment and poverty.Protesters expressed anger about austerity measures, unemployment and poverty.
'Unconventional instruments'
Mr Draghi did not say how much the bank would spend on buying assets, just that the programme would have a "sizable impact on the bank's balance sheet" and would support specific market sectors.
The bank had already said it would not be buying government bonds like other central banks have done.
Mr Draghi said the programme "should ease the monetary policy stance" of the bank.
He said the bank was "committed to using additional unconventional instruments" in the future should inflation remain low for too long.
Weak outlook
Consumer price inflation in the eurozone fell to 0.3% in September, its lowest rate for almost five years and well below the ECB's target of close to, but below, 2%.
The eurozone economy was stagnant between April and June this year, with the German and Italian economies shrinking, following growth of just 0.2% in the first quarter.
Mr Draghi suggested the chances of a strong turnaround in the region's economy were slim.
"The recovery is likely to continue to be dampened by high unemployment, sizable unutilized capacity and continued negative bank loan growth to the private sector.
"In particular, the recent weakening in the euro area's growth momentum, alongside heightened geopolitical risk, could dampen confidence and, in particular, private investment."