-ECB President Mario Draghi
The European Central Bank has revised down its growth forecast on Thursday, and kept the main refinancing rate on hold, as the economy is still struggling to grow. The ECB President said that the 17-nation bloc is expected to shrink 0.6% in 2013, as downside risks still persist, while also saying a gradual recovery would begin in 2014. In March, the European Central Bank expected a contraction of between 0.9% and 1.0%. As Draghi is marginally more upbeat on the growth forecast for the next year, the economic output is likely to grow 1.1% instead of growth of between 0% and 0.2%.
The benchmark interest rate was kept at 0.5%, after reducing it by a quarter point last month, meeting analysts' expectations. A slight improvement in business sentiment is providing Mario Draghi with more time to consider more bold measures that the ECB may deploy to boost growth in the Eurozone, which is now in its longest recession since the creation of single currency in 1999.
Among possible options of further stimulation of the economy are cited a cut of the so-called deposit rate into the negative territory, increased credit to banks, revival of the market for the asset-backed securities and clarifying the question on how long the borrowing costs will stay at record-low.
© Dukascopy Bank SA