Interest Rates Are Still at Record Lows in Europe

In late April, the European Central Bank (ECB) resolved to keep interest rates at historically low levels and also announced that it plans to continue its aggressive debt reduction and purchasing program to further boost the economy of the member nations that make up this powerful trading bloc.

According to a news report published by BBC News, ECB President Mario Draghi said that the economic recovery was more solid than ever, but he pointed out that inflation still needs to prove whether it can sustain the current pace and establish long-term resistance.

Draghi has pointed out that promoting growth and job creation are important goals for the ECB, but he is worried that the continent is bordering on deflation. The continued reduction of consumer prices discourages business activity and thus ends up impacting the economy by setting off a deflationary course.

The ECB is really hoping for inflation to spread in the region, and for that it plans to continue applying a radically expansionary monetary policy, which has already been taking place for more than a year.

During a news conference in Frankfurt, Draghi explained that the data available since March confirmed that the cyclical recovery of the economy has been gradual and solid.

The interbank interest rate that banks can access and borrow for 24 hours, will stay at 0.25 percent for the time being while the daily deposit rate, which fell into negative territory for the first time in June 2014, is now at 0.4 percent.

Economists do not expect new announcements with regard to European interest rates before the second round of the presidential elections in France, which are scheduled for May 7.

Inflation contracted in March to 1.5 percent after having reached two percent in February, the hopeful target rate currently sought by the ECB members.

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