Newspaper article International New York Times

E.C.B. Pauses, Waiting for Policies to Bear Fruit

Newspaper article International New York Times

E.C.B. Pauses, Waiting for Policies to Bear Fruit

Article excerpt

As expected, the European Central Bank decided to maintain its monetary policy, which it hopes will stimulate the economy and ward off deflation.

The European Central Bank left its monetary policy intact on Thursday, choosing to wait for the extraordinary measures it enacted a month ago to work their way through the economy before deciding whether additional action was needed to bolster growth and keep deflation at bay.

"The key E.C.B. interest rates will remain at the current levels for an extended period of time," Mario Draghi, the central bank president, said at a news conference in Frankfurt, citing the continuing outlook for low inflation.

The decision, announced after the central bank's Governing Council met in Frankfurt, had been widely expected after the bank unveiled initiatives last month to stimulate the economy, including imposing a negative interest rate on the deposits that lenders hold at the central bank and making more cheap loans available to banks.

"It will simply take several more months before the impact of last month's decisions can adequately be assessed," Carsten Brzeski, an economist at ING Group in Brussels, wrote in a research note.

The only surprise was in Mr. Draghi's announcement that, as of January, the Governing Council would start holding monetary policy meetings once every six weeks, instead of monthly, and that it would publish minutes of its meetings.

Publication of the minutes signaled a concession to critics who had called for the bank to follow what has become a widespread practice aimed at increasing transparency in monetary policy. Since 2005, the United States Federal Reserve has been publishing its minutes three weeks after each policy meeting.

The change in schedule also brings the frequency of central bank meetings in line with that of the Fed, but Mr. Draghi said that was irrelevant.

"We have no plans to synchronize with anyone," he said. "The Governing Council decided that a monthly frequency was just too tight. That's the reason."

Mr. Draghi also revealed details of the central bank's new program to spur the credit market by providing cheap, four-year loans to banks in exchange for a commitment that the funds be lent to companies, instead of, for example, used to buy government bonds or other financial assets. …

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