European Central Bank Holds Primary Rate Constant

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The European Central Bank has kept all interest rates unchanged in its monthly meeting held today, Reuters reports. In a move widely anticipated by economists, the European Central Bank voted not to change any of its interest rates during its monthly meeting. The inaction is largely in line with expectations, given the bank’s unexpected move last month and the time needed to assess its efficacy.

In November, the central bank decided to slash its primary refinancing rate from 0.5 percent to 0.25 percent, reacting to a drop in inflation rates to 0.7 percent in October. The bank cited fears over s0-called “deflationary pressures,” a dreaded set of economic outcomes in which low inflation rates discourage spending throughout the economy.

With inflation rates rising only marginally in November, it would appear at first that further action would be needed to combat the problem. However, this is not true on a short-term basis. The ECB wants time to assess the impact of its rate decrease, and a time scale of several months will probably have to pass before any other actions are considered.

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