ECB holds rates, hints at all-or-nothing policy stance

Thu Mar 6, 2014 1:06pm EST
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By Leika Kihara

FRANKFURT (Reuters) - The European Central Bank left interest rates on hold and unveiled no other measures to bolster a fragile euro zone recovery on Thursday, despite forecasting low inflation for years to come.

ECB President Mario Draghi also described as "relatively limited" the benefits of one technical option for loosening lending conditions, suggesting the bank will either do nothing or else take bold policy action should the outlook deteriorate.

The ECB left its main interest rate at 0.25 percent, a move generally expected by markets, and held the deposit rate it pays banks for holding their money overnight at zero.

Draghi said the latest economic information suggested recovery was on track and needed no extra push for now.

"We saw our (economic) baseline by and large confirmed," he told a news conference after what he described as a "broad discussion" on interest rates, and other policy instruments.

"The news that has come out since the last monetary policy meeting is also, I would say, by and large on the positive side."

The euro jumped against the dollar to its highest since December and to a peak against the yen not seen since January 23 after the ECB signaled no need for new economic stimulus.

Inflation has been in what Draghi calls the "danger zone" below 1 percent for five months now and was running at 0.8 percent at the last count.   Continued...

The euro sign landmark is seen at the headquarters (R) of the European Central Bank (ECB) in Frankfurt September 2, 2013. REUTERS/Kai Pfaffenbach