THE euro area is mired in recession and unemployment in the single-currency zone continues to scale new heights, reaching 11.8% on figures out this week, up from 10.6% a year earlier. But the European Central Bank did nothing to help today, leaving its key interest rates unchanged. The governing council took the decision unanimously, ECB president Mario Draghi told the press conference.
The lack of action amid so much economic misery may seem surprising, but the ECB is sticking to the judgment it reached in December when it stayed its hand even though the staff forecast painted a much grislier picture for eurowide GDP in 2013 (a contraction of 0.3%) than in its previous projection last September (a rise of 0.5%). The council believes that the economy is lagging behind the improvement in financial conditions brought about largely by its own policies.
Choosen excerpts by Job Market Monitor from
via The ECB’s meeting: Mario’s waiting game | The Economist.
ECB rules out stimulus despite record jobless and fiscal squeeze
Mario Draghi, the ECB’s president, said the financial landscape has been transformed, citing a sharp drop in bond yields across the EMU periphery, a stock market rally and recovery of bank deposits in Greece and Spain. Capital flight has begun to reverse.
He even spoke of “exuberance” creeping into pockets of the credit system, with leveraged buy-outs and private equity deals becoming frothy – the first warning by the ECB of an incipient bubble as the fresh cycle gathers momentum.
The euro surged more than two cents to $1.32 against the dollar after he revealed that the ECB’s governing council had agreed “unanimously” to hold interest rates at 0.75pc, implying that “doves” who called for rate cuts last month have been silenced by a clutch of rising confidence indicators.
However, the ECB is gambling that the rosier mood will be enough to lift the real economy out of a deep slump during another year of fiscal contraction, with the sharp squeeze spreading from Italy and Spain to France.
Choosen excerpts by Job Market Monitor from
via ECB rules out stimulus despite record jobless and fiscal squeeze – Telegraph.
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