ECB holds rates; Draghi says bank ‘ready to act’

EUROPEAN Central Bank president Mario Draghi expects a gradual economic recovery later this year but is “ready to act” if the outlook worsens.

Speaking at a news conference after the ECB held rates at a record low of 0.75 per cent – still the highest level among the world’s major central banks – Draghi said talks at the monthly meeting had been extensive and the consensus was to hold fire.

But he added that the bank stood ready to act and was looking at “various tools” beyond lower borrowing costs as there was no certainty the eurozone economy would pick up.

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“In the coming weeks, we will monitor very closely all the incoming information on economic and monetary developments, and assess the impact on the outlook for price stability,” said Draghi.

The eurozone is stuck in recession though the ECB predicts gradual recovery later this year.

Analysts have speculated that the central bank might be looking at ways to encourage more lending to companies. It could also extend credits to banks beyond its current three-month limit.

Meanwhile yesterday, Japan’s central bank made sweeping changes to its monetary policy, aiming to spur inflation and get the world’s third-largest economy out of a long, debilitating slump.

It intends to double the money supply and achieve a 2 per cent inflation target at the “earliest possible time.” Japan has seen years of falling prices.