ECB holds main interest rate, sees prolonged lack of inflation

The European Central Bank left interest rates unchanged at its final policy meeting of the year.

Last month the ECB surprised the financial markets with a cut in the main rate to a record low of 0.25 percent.

Policymakers have hinted the bank is ready to do more, but no specifics have been mentioned and they have played down the prospect of immediate action, particularly after a recent drop in unemployment.

ECB President Mario Draghi said: “We are ready to consider all available instruments,” but he added the bank was not going to issue new long-term, low interest loans to banks until it was sure the money would be used to bolster the economy.

Draghi told a news conference a previous round of loans – or LTROs – had come at a time of credit crisis but that this was not the case now.

He also said that banks had used the money for buying government bonds and that not much of the lending made it into the economy.

“So if we are to do an operation similar to the LTRO, we’re going to make sure this is going to be used for the economy,” Draghi said.

Low inflation in the eurozone means the bank has the leeway to take additional action to stimulate the region’s economy early next year.

The bank’s experts expect inflation to hold broadly steady well below its roughly two percent target over the next two years, dipping to 1.1 percent in 2014 before inching up to 1.3 percent in 2015,

Some German politicians have criticised the ECB’s low interest rate policy.

Markus Soeder, the finance minister of the southern state of Bavaria, said recently that the policy threatened financial order in the eurozone and caused a “stealthy expropriation” of German savings.