ECB maintains no change for a change

Keeping an eye on the slowdown in Eurozone’s recovery, the European Central Bank (ECB) announced its monetary policy in Vienna on Thursday. Mario Draghi, president of ECB kept the interest rates unchanged maintaining a negative growth outlook wherein the growth in the next quarter would be lower than the current.

The ECB’s governing council left the main refinancing rate at zero. The deposit rate imposed on banks’ reserves was held at 0.4 per cent.

Despite of a positive kickoff to the year the pick-up to investment was much lower as the currency’s strength was mostly driven by the household spending. However, the balance of risks has improved. Eurozone grew 0.5 per cent for Q1CY16 outpacing the growth in world’s largest economies U.S. and U.K.

Since March, ECB has been buying 80 billion euros p.m. to bring liquidity in eurozone and thereby maintain lower interest rates. However, the growth in lending to businesses has been just 1.2 per cent YoY. Lending to households has increased 1.5 per cent annually.

Measures have been built to bring higher concentration on credit creation in the otherwise weak business. ECB would initiate to buy high-grade corporate bonds on June 08 as a part of its expected 1.7 trillion euro quantitative easing and hold on June 22 the first among four auctions of central bank cash to subsidise banks to lend to businesses.

The noteworthy discussion in the meeting was refusal to cut Greece amid its negligence as Eurozone is yet to verify that Greece was actually implementing the reforms it pushed through an unwilling parliament last month. The Eurozone put billions in Greece bailout last week, but eurozone finance ministers need to be satisfied for further acceptance of sovereign papers by ECB.