European Central Bank Holds Interest Rates Steady and Low at 0.5 Percent

 @natrudy on June 06 2013 8:24 AM

The European Central Bank (ECB) on Thursday opted to hold its key lending rate at 0.5 percent, the central bank said.

The ECB and its top officials are waiting to see whether hints of a stabilizing European economy will transform gradually into a genuine economy recovery, reports Reuters.

The central bank will hold a press conference to discuss the decision at 8:30 a.m. EDT, which can be viewed here.

The ECB is expected to announce only minor changes to their previous March forecast, cutting gross domestic product (GDP) growth expectations, but sticking to their predictions about inflation, according to Reuters.

“After leaving interest rates on hold as expected, the ECB is likely to keep a cautiously open mind to both further rate cuts and measures to stimulate the ABS [asset-backed security] market,” said Jennifer McKeown, senior European economist at Capital Economics in London.

But McKeown expects a cut to the bank’s zero percent deposit rate, plunging it into a negative deposit rate, within coming months.

That’s despite recent renewed warnings from several members of the ECB’s Governing Council, which sets interest rates, that a negative deposit rate could have undesirable impacts, said McKeown.

McKeown said ECB President Mario Draghi is “unlikely to promise the imminent and bold action that would be needed to make a meaningful difference to the economic outlook or to gain ground on more proactive central banks elsewhere.”

This story will be updated as the press conference progresses.

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