European Central Bank Keeps Interest Rates On Hold

European Central Bank President Mario Draghi says Europe’s economic rebound is still on track and worrisome low inflation should eventually rise.

The “moderate economic recovery… is proceeding in line with our expectations,” Draghi said Thursday after the bank left its benchmark interest rate unchanged at a record low 0.25 percent and held off taking other measures to boost the economy.

The euro rose briefly after Draghi’s comments, trading 0.5 percent higher on the day at one point to $1.3980 before falling back to $1.3900.

Draghi said the bank was ready to take more action to ward off the risks of a too-long period of low inflation. The annual inflation rate of 0.7 percent is below the bank’s target. He said the bank would have more inflation data at its June meeting.

Low inflation makes it harder for people and governments to reduce debt. There have also been worries about deflation, an extended drop in prices that can cripple growth by pushing consumers to delay purchases in hopes of bargains.

A rate cut could give growth a small boost in theory by lowering borrowing costs for banks and companies. It could also help lower the euro. A weaker euro would help exporters and boost inflation.

This article appeared in print in the May 9th, 2014 edition of Hamodia.