The European Central Bank left rates unchanged at their first meeting of the year yesterday with president Mario Draghi saying he expects interest rates to stay low for an extended period.
The ECB’s governing council, convening in Frankfurt for the first policy-setting meeting of 2014, left the key interest rate at a record low of 0.25 per cent.
The ECB has a sizeable range of instruments at its disposal if it needs to loosen policy further, and it remains ready and able to act, Mr Draghi said.
He emphasised that keeping inflation from being too high or too low was a major driver, as was ensuring that there was not unwarranted tightening due to money market rates.
“Let me be absolutely clear… We have a mandate to maintain price stability – in both directions,” he told a news conference.
He would not say what actions the bank may take.
“We have several instruments. The choice will depend on what happens,” Mr Draghi said.
The ECB estimates that the economy will expand 1.1 per cent this year after contracting 0.4 per cent in 2013.
There have been suggestions that the ECB may make a further rate cut in the coming months, with the interest rate anticipated to fall to 0.10 per cent.