The European Central Bank has kept its benchmark
interest rate at 0.25 per cent.
The bank last cut rates to a record low in a
surprise decision in November.
Inflation in the eurozone region slowed to 0.7
per cent in January from 0.8 per cent in December.
Despite fears of deflation in the eurozone, the
bank believes the economies of the 18 countries in the zone are recovering
after the bloc emerged from recession last summer.
Holger Schmieding, chief economist at Berenberg
Bank, believes the ECB is right not to be concerned about deflation.
“This Anglo-Saxon hysteria about small falls in
prices is absolute rubbish,” he said.
“It can be a problem if prices fall too much and
people stop buying, but small falls are not a problem.”
On Wednesday, Markit’s Eurozone Composite
Purchasing Managers’ Index indicated that growth in the private sector last
month was its strongest for two and a half years.
The British Broadcasting Corporation reported
that in addition to holding its benchmark rate at 0.25 per cent, the ECB also
left unchanged the rate it pays on bank deposits at zero,
Schmieding also said, “Prices are stable. Leading
economic indicators are close to trend.
“The European Commission’s Sentiment Index is at
100.9 which is actually a little bit above trend. So the recovery is happening.
[ECB President] Draghi should have acted earlier, but belatedly, the recovery
is on track.”
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