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ECB holds interest rates steady to curb eurozone slowdown

dw.com logo dw.com 3/7/2019 dw.com

The ECB has pledged to keep interest rates at their current historic low in a bid to revive the eurozone's weakening economy. The move comes as fears about Brexit and global tensions threaten growth across the bloc.

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Policymakers at the European Central Bank on Thursday announced a new round of cheap loans to banks and said record low interest rates would remain unchanged "at least through the end of 2019."

Previously, the bank had indicated that the earliest rate hike would come in the fall.

The measures aim to allay fears of a eurozone slowdown spurred by uncertainty over Brexit, a US-China trade war, and threats by Washington to impose tariffs on European auto imports.

"We're coming out of, and maybe we still are in a period of, continued weakness and pervasive uncertainty," ECB chief Mario Draghi told reporters in Frankfurt.

"Our decisions certainly increase the resilience of the eurozone economy," he added. "But can they address the factors that are weighing on the economy in the rest of the word? They cannot."

Read more: Eurozone faces economic downturn, more stimulus needed

Reacting to global economy troubles

The ECB's move follows similar steps by the US Federal Reserve, which has also indicated it would halt interest rates in response to concerns about the state of the global economy. China too has acted to boost support for businesses in the face of a slowdown there.

The Frankfurt-based ECB on Thursday said it would keep its main refinancing rate at zero, where it's been for the past three years. The marginal lending rate will be held at 0.25 percent, and the rate on deposits at -0.4 percent.

It is also offering a fresh series of ultra-cheap loans to banks to keep credit flowing. The ECB has loaned banks more than €700 billion ($790 billion) in previous rounds of the so-called Targeted Long-Term Refinancing Operation (TLTRO).

Read more: ECB's Draghi warns over eurozone slowdown, trade war risk

Carsten Brzeski, chief economist at the bank ING Germany, said the measures came surprisingly early.

"It is clearly an attempt to stay ahead of the curve," he said. "Any next step from here to tackle a severe downswing of the economy would now require unprecedented measures."

Read more: Germany avoids recession with flat final 2018 quarter

Growth, inflation forecasts slashes

Also on Thursday, the ECB cut its forecast for eurozone economic growth in 2019 to 1.1 percent from a previous estimate of 1.7 percent.

Inflation is expected at 1.2 percent, down from an earlier forecast of 1.6 percent.

In response to the adjusted forecasts, the euro fell Thursday to its lowest level since mid-November, slipping 6 percent to 1.123 against the dollar.

nm/sms (Reuters, AP, AFP)

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