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ECB interest rates remain unchanged ECB interest rates remain unchanged
(about 2 hours later)
The European Central Bank (ECB) has held interest rates at an historic low of 0.05%. The European Central Bank (ECB) remains ready to do whatever is necessary to combat falling inflation in the eurozone, bank president Mario Draghi has said.
It comes amid falling inflation and worries over sluggish growth in the eurozone. His comments came as the ECB held interest rates at 0.05%.
Last month, the European Commission cut its growth forecast for eurozone economy to 0.8% for this year from an earlier forecast of 1.2%. Mr Draghi added the bank would assess the impact of its current stimulus measures early next year.
And last week official figures showed inflation fell back to 0.3% in November from 0.4% the previous month. He also gave his strongest indication yet that the ECB was willing to buy government debt.
The Organisation for Economic Co-operation and Development (OECD) has warned the euro area may be stuck in persistent stagnation. ECB staff "have stepped up the technical preparations for further measures, which could, if needed, be implemented in a timely manner," he said.
Economic stimulus The bank has so far resisted pressure to follow in the footsteps of central banks in the UK, UK and Japan by stimulating the eurozone economy through the purchase of government bonds.
ECB president Mario Draghi will hold a press conference later. His comments will come under scrutiny for any hints of future action by the bank.
Analysts expect Mr Draghi to say the ECB remains ready to take whatever action is necessary to raise inflation but that he will also prepare the ground in order to implement new anti-deflation measures next year.
The ECB has so far resisted pressure to follow in the footsteps of central banks in Britain, Japan and the US to help stimulate the economy through the purchase of government debt.
In part this has been because of opposition from Germany, which has argued that asset purchases of this type are outside of the ECB's remit.In part this has been because of opposition from Germany, which has argued that asset purchases of this type are outside of the ECB's remit.
But many now suggest it is a question of when not if the bank begins a programme of quantitative easing (QE) as it is beginning to run out of alternatives. However, Mr Draghi said it would be "illegal" for the ECB not to pursue its mandate to control inflation.
Mr Draghi said the bank's Governing Council - the equivalent of the Bank of England's Monetary Policy Committee - remained "unanimous in its commitment to using additional unconventional instruments within its mandate".
He added: "This would imply altering early next year the size, pace and composition of our measures."
Falling inflation and low economic growth have been persistent problems in the eurozone for most of this year.
In September, the bank announced it would buy covered bonds and other assets for two years in an effort to stimulate the eurozone economy.In September, the bank announced it would buy covered bonds and other assets for two years in an effort to stimulate the eurozone economy.
Covered bonds are those backed by public sector loans or mortgages.Covered bonds are those backed by public sector loans or mortgages.
The ECB is due to publish its own latest updated inflation and growth forecasts and is worried that medium-term inflation expectations could become permanently separated from its target of just below 2%. Analysis: Andrew Walker, BBC economics correspondent
It certainly sounds as though the European Central Bank is edging towards quantitative easing.
Staff, we were told by the ECB president, have stepped up technical preparation for further "unconventional measures". He also suggested that action could come early next year.
It's worth remembering that the ECB has already started something that has a lot in common with QE. It is buying financial assets based on private sector loans with newly created money.
Where it differs from US, British and Japanese QE is the scale - it's a much smaller programme - and the fact that the assets don't (yet) include government debt.
Most of the great operas came from what is now the eurozone. The ECB seems to be once again drawing breath as it prepares to sing. If it does, it will be after the longest overture there has ever been.
Economic growth
Latest figures show the eurozone grew by 0.2% in the third quarter of the year, and the rate of inflation fell back to 0.3% in November from 0.4% the previous month.
The Organisation for Economic Co-operation and Development (OECD) has warned the euro area may be stuck in persistent stagnation.
Mr Draghi admitted inflation was likely to stay low for a prolonged period of time and that lower oil prices were likely to lead the inflation rate lower.
The ECB's own estimate of economic growth was also revised down substantially to 0.8% this year, bringing it in line with an earlier European Commission forecast.
The bank forecast the eurozone economy would grow by 1% in 2015 and 1.5% in 2016.
While insisting that current medium to long term inflation expectations remained stable, Mr Draghi said: "We will not tolerate prolonged deviations from price stability.
"We don't want a tightening of our monetary policy stance due to a medium-term inflation expectations."
Mr Draghi said there had been "a very rich, ample discussion" on what unconventional instruments the bank had available to it within its mandate.
He added that the work of the ECB committees would continue, adding: "We discussed broadly all sorts of measures, we... discussed various options of QE. And more work is needed and... we'll keep you informed."