- Mario Draghi, ECB President
With no surprises for financial markets the European Central Bank stayed pat on its monetary policy on Thursday, leaving the key refinancing rate at 0.25%. At the same time, the deposit rate was left at 0% and the marginal lending facility rate at 0.75%. This is definitely a welcoming sign for the 18-nation bloc and single currency, as amid deflation fears the ECB was expected to introduce negative deposit rate or even introduce a U.S.-style stimulus programme.
What is more important, the central bank has upgraded its growth outlook to 1.2% for this year, while also lowering its inflation estimate. The inflation is now expected to stand at 1.0% in 2014– twice less than the official target, compared with 1.1% expected earlier. However, during the press conference, Draghi pointed out that deflation risks in the Eurozone are easing for now, and pledged inflation will hit the desired 2% by the end of 2016.
Stronger-than-expected inflation in February and a set of positive data from Germany, that all eased pressure on the ECB to take radical steps to boost growth. Growth is now forecasted to reach 1.2% this year, 1.5% next year and then accelerate to 1.8%. When being compared with 2013 forecasts, those numbers should be interpreted as a promising sign for the Eurozone, while ECB's inflation outlook is diminishing IMF concerns about the deflation.
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