Preparing for a change at the top, the European Central Bank has decided to keep interest rates on hold and at their all-time lows. Mario Draghi, who had his last monetary policy meeting as president of the ECB, is leaving after an eight-year term during which key rates were never raised. At the subsequent press conference, Draghi defended the bank’s monetary policy which has received a serious amount of criticism from various corners of Europe.
‘Super Mario’ Defends Controversial Negative Rate Policy
Europe’s central bank announced Thursday that the benchmark borrowing rate remains at 0% and the main deposit rate, the one banks face when leaving money at the ECB, stays at -0.5%. The record low was approved in September when the financial institution also decided to restart its stimulus program. In November, the bank will begin purchasing 20 billion euros’ worth of bonds a month and the quantitative easing is an open-ended commitment. Within the previous asset purchase program, which ended in December 2018, ECB spent over €2.6 trillion. The bank first started buying bonds in early 2015.
ECB expects key interest rates to remain at their present or even lower levels until inflation in the common currency area moves closer to 2%. Despite all efforts in that direction, the indicator has persistently remained well below the target, reaching a record low of 0% in the spring of 2016. But “Super Mario,” whose fans believe he has saved Europe’s monetary union and avoided deflation, defended the bank’s current monetary policy. Improvements in the economy, he told journalists after the meeting, have more than offset the side effects of negative rates.