The European Central Bank has kept its gunpowder dry again, holding its key interest rates unchanged for the fifth month in a row.
The ECB left its central “refi” or refinancing rate unchanged at 0.25 per cent at its monthly policy meeting on Thursday, it said in a statement.
The central bank also held its other two key rates – the marginal lending rate and the deposit rate – unchanged at 0.75 per cent and zero per cent respectively.
The ECB last pared back eurozone borrowing costs in November.
And while few ECB watchers had been betting on a further cut this month, there is still some expectation that the central bank may ease monetary conditions in the 18 countries at some point to ward off the spectre of deflation.
For the time being, ECB officials reject suggestions that the euro area is in danger of slipping into deflation – the destructive spiral of falling prices in which consumers put off purchases, thus destroying salaries, jobs and investment.
The EU statistics agency Eurostat put area-wide inflation at just 0.5 per cent in March, down from 0.8 per cent in February.
That is way below the ECB’s target of just under 2.0 per cent.
ECB President Mario Draghi was scheduled to explain the reasoning behind the decision at a news conference.
Newedge Strategy analyst Annalisa Piazza said she expected Draghi “to keep all options on the table” and keep his assessment “dovish” or open to further monetary easing.
“We signalled some risks for a cut but the move would have been more a ‘cosmetic’ signal rather than a strong tool to fight the current disinflationary scenario,” Piazza said.
Capital Economics economist Jonathan Loynes said “we still think the ECB will probably have to act again at some point to boost the sluggish recovery and address the risks of deflation in the currency union.”