Eurozone Monetary Policy


ECB keeps rates on hold for fourth consecutive month

At its meeting on 4 April, the European Central Bank (ECB) kept the refinancing rate unchanged at 1.00%. The decision, which matched market expectations, represents the fourth consecutive month in which European monetary authorities have left rates unchanged. At its current level, the refinancing rate sits at the record low where it stayed for almost two years until the start of a tightening cycle at the beginning of 2011. In the accompanying statement, monetary authorities noted "a stabilisation in economic activity at a low level in early 2012." However, the ECB expects "the euro area economy to recover gradually in the course of the year". According to the Bank, economic activity will be supported by "foreign demand, the very low short-term interest rates in the euro area, and all the measures taken to foster the proper functioning of the euro area economy". However, downside risks remain on the back of "tensions in euro area sovereign debt markets." Meanwhile, "inflation is likely to stay above 2% in 2012", as a consequence of the recent surge in energy prices. Inflation is expected to revert to below 2% in early 2013.

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