ECB keeps rates steady in first meeting since Brexit vote
Eurozone’s resilience is ‘encouraging,’ says chief Mario Draghi
In line with expectations, the European Central Bank kept current interest rates and levels of stimulus unchanged Thursday despite worries about how Britain’s vote to leave the European Union will affect the continent’s economy.
Meeting for the first time since last month’s referendum in the U.K., the ECB’s 25-member governing council voted to keep its lending rate at a record low zero and its bond-buying program at $88 billion per month.
Britain’s departure from the EU may disrupt trade and the Bank of England held off increasing stimulus at its last meeting as it takes stock of the situation.
ECB President Mario Draghi said in a news conference in Frankfurt that the eurozone had shown “encouraging resilience” in the face of Brexit — a British EU exit — but that “over coming months with new information including staff projections, we will be better able to reassess macro- economic conditions.”
As part of Brexit, the U.K. may be forced out the EU’s single market, a tariff-free trading bloc that covers 500 million people. Draghi did not rule out increasing ECB stimulus at the next meeting in September if Brexit starts to impact the eurozone’s economic outlook.
“The ECB was fairly tight lipped about the impact of Brexit on the eurozone economic outlook, but the little information it released today did not sound overly alarmed,” Bill Adams, an economist at PNC Financial Services Group, said in emailed comments.
Long term, the ECB wants to raise inflation — currently just above zero — to what it considers a normal level, at or near 2%. It also wants to strengthen economic growth across the 19 countries that use the euro currency.
The International Monetary Fund forecast that eurozone growth would decelerate to 1.4% in 2017 from 1.6% in 2016. Stock and currency markets did nit immediately make strong moves following the ECB’s announcement.
The British pound has been under pressure from the dollar and euro for weeks.