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European Central Bank holds interest rates and bond-buying steady as it weighs up the eurozone’s recovery

2021 02 08T171956Z_1959307296_RC2HOL9URTLX_RTRMADP_3_EU RECOVERY LAGARDE.JPG
Christine Lagarde is the president of the European Central Bank.

The European Central Bank kept interest rates at record-low levels on Thursday and kept its enormous bond-buying program steady as it weighed up the recovery in the eurozone economy.

The ECB’s main deposit rate will stay at -0.5%, while the coronavirus bond-buying package will stay at 1.85 trillion euros ($2.23 trillion), the governing council said in a statement.

At the bank’s last meeting it pledged to step up the pace of bond purchases in response to rising bond yields.

COVID-19 battered the eurozone economy in 2020, and a resurgence of cases has led many countries to reimpose tough restrictions in 2021.

But policymakers and citizens see hope on the horizon. The European Union’s initially slow coronavirus vaccine rollout is picking up pace and the International Monetary Fund has upgraded its growth forecast for the eurozone in 2021 to 4.4%, after the economy shrank 6.6% in 2020.

The European Central Bank’s decision to hold interest rates came as no surprise to analysts.

“Vaccination numbers within the euro area are beginning to pick up pace, providing hope that economies will soon be able to start the reopening process,” Mohammed Kazmi, portfolio manager for Swiss private bank UBP, said.

He added: “We think it makes sense for investors to start preparing and positioning for the June ECB meeting, which will likely be accompanied by significant growth revisions higher and [bond] purchases for Q3 probably moving back towards a more normal pace.”

The euro was around 0.1% higher against the dollar on Thursday at $1.204, while the yield on the key German 10-year government bond had risen 0.9 basis points to -0.250%.

Read the original article on Business Insider

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