ECB Keeps Rates at Record Low Yield

The European Central Bank kept interest rates on hold after its pledge to buy government bonds lowered borrowing costs and boosted confidence that the euro area can emerge from recession next year.

Policy makers meeting in Frankfurt today left the benchmark rate at a record low of 0.75 percent, as predicted by 56 of 61 economists in a Bloomberg News survey. They also left the deposit rate at zero. ECB President Mario Draghi will hold a press conference at 2:30 p.m. to brief reporters on the decision and reveal new economic forecasts, including a first projection for 2014.

Italian and Spanish bond yields have plummeted since Draghi promised to do whatever it takes to save the euro and announced an unlimited bond-purchase program. That’s helping to ease the strain on the euro region’s third- and fourth-largest economies and fueling optimism that the sovereign debt crisis can be contained, even after the 17-nation currency bloc slipped into recession.

“I expect solid growth for the euro area next year and no change in interest rates,” said Ulrich Kater, chief economist at DekaBank Deutsche Girozentrale in Frankfurt. “Only if the economy doesn’t grow might the ECB have to come up with a Plan B and lower interest rates.”

Bloomberg

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