The European Central Bank decided not to change interest rates at its meeting in Frankfurt yesterday because economic and monetary conditions had not changed enough to warrant it, ECB president Mario Draghi said.
The bank left interest rates unchanged but also failed, as many had expected, to suspend weekly operations to soak up money it spent on sovereign bonds at the height of the euro zone debt crisis, known as sterilisation.
“The suspension of sterilisation … is one of the instruments that is in our list but we didn’t see any development in the money markets that would lead to that unwanted tightening of monetary conditions that would justify the use of this instrument,” Mr Draghi told a news conference.
He also said a survey of conditions showed no major changes to prompt any moves. “We saw our (economic) baseline by and large confirmed,” he said. Pausing the so-called sterilisation of the Securities Markets Programme (SMP) would have added around €175 billion in liquidity to the market.
Hundreds of thousands of Irish mortgage holders will be disappointed by Frankfurt’s decision to hold firm.
Nearly 400,0000 people, or more than 60 per cent of the total home loan market, on tracker mortgages would have benefited from a cut.
For every quarter of a point the ECB lowers its rates, the monthly cost of servicing a €100,000 tracker mortgage falls by about €15, so the average tracker mortgage holder with an outstanding loan of €300,000 will see monthly repayments fall by €45 .
The ECB also left the deposit rate it pays banks for holding their money overnight at zero.