ECB interest rates expected to remain unchanged

ECB interest rates expected to remain unchanged

No changes in euro zone interest rates are expected today as the European Central Bank assesses the impact of recent moves to flood the banks with cash to avert a credit crunch, analysts say.

The ECB’s governing council, meeting today for its regular monthly policy-setting meeting, is not expected to announce any changes to interest rates or any other measures after it pumped a record €529.5 billion into euro area banks last week, analysts said.

“The ECB looks firmly poised to stay put with regard to interest rates and further liquidity measures,” said Commerzbank economist Michael Schubert. Nevertheless, “in view of the still high uncertainty, the ECB council will keep the door open to additional measures,” he predicted.

Last week, the ECB threw open its liquidity floodgates for the second time in two months, flooding the banking system with cheap funds in order to avert a dangerous credit squeeze. That brings to more than €1 trillion the total amount banks have borrowed from the ECB at exceptionally low interest rates since December.

The ECB hopes the banks will lend the money to households and businesses and also use it to bring down government borrowing costs. The measure does indeed seem to be working, even if analysts agree it will not be enough on its own to solve the euro zone’s crippling debt crisis and will merely buy time.

 

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