European Central Bank holds interest rates at record lows

Chris Papadopoullos
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The ECB cut rates and boosted its asset purchase programme last month (Source: Getty)

The European Central Bank decided not to cut interest rates further today.

The interest paid on deposits kept at the Frankfurt-based central bank was kept at minus 0.3 per cent. It was cut to minus 0.2 per cent last month while the ECB also ramped up its €60bn asset purchase programme in December, extending it by six months to March 2017.

The main refinancing rate was kept at 0.05 per cent and the rate at which it lends to banks overnight was kept at 0.3 per cent.

Eurozone inflation, which the ECB targets at just under two per cent, rose to 0.2 per cent in December. It has been hovering around since the beginning of 2015 when oil prices collapsed, but had been trending below since 2014.

In its forecasts published last month, real GDP was projected to increase by 1.5 per cent in 2015, 1.7 per cent in 2016 and 1.9 per cent in 2017. Economists at the ECB expected inflation to reach 1.6 per cent in 2017, broadly in line with its target of just under two per cent.

Some economists believe Mario Draghi is intent on conducting more stimulus, but has been held back by other members of the ECB's governing council. Details of the December published this month revealed strong divisions among the ECB's decision-makers over whether or not policy should be further loosened to support the economy.

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