ECB keeps interest rates unchanged as Brexit shock fades

[FRANKFURT] The European Central Bank held its record-low interest rates unchanged Thursday, a spokesman said, as analysts expected the bank to wait for a clearer picture to emerge of the Brexit impact before making any drastic policy changes.

The bank's governing council voted to keep the benchmark refinancing rate at zero per cent, while the rate on the marginal lending facility remains at 0.25 per cent and the bank deposit rate at -0.4 per cent, the spokesman said after the policy meeting.

The council expects rates to remain at current, or lower, levels "for an extended period of time", the ECB said in a statement.

The decision was widely expected after early data suggested the eurozone held up well to the initial shock of Britain's June vote to quit the EU, with employment and surveys of purchasing managers stable and ECB figures showing loans to businesses growing by 1.3 per cent in July.

But since Britain has yet to trigger the process to extricate itself from the bloc, analysts warn that it could take time for the economic fallout to make itself felt.

The ECB also refrained from making any tweaks to its massive asset-buying programme to encourage lending and reinvigorate growth, which has seen it purchase over a trillion euros in government and corporate bonds over the past 18 months.

"The governing council confirms that the monthly asset purchases of 80 billion euros are intended to run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim," the bank said in a statement.

With stubbornly low inflation and sluggish growth weighing heavily on the minds of policymakers, analysts were expecting ECB chief Mario Draghi to hint at further stimulus measures at a press conference later on Thursday.

The bank is also set to announce its latest growth and inflation forecasts for the 19-nation eurozone.

AFP