A mixed message from a divided institution.
Photograph by Daniel Roland — AFP/Getty Images
By Geoffrey Smith
October 20, 2016

The European Central Bank left its official interest rates unchanged for the fifth straight month Thursday, at the latest meeting of its policy-setting governing council.

As expected, the Frankfurt-based ECB left its key discount rate at -0.4%, its refinancing rate at 0% and its marginal lending rate rate at 0.25%. That means that the central bank will continue to charge Eurozone banks for any excess liquidity that they keep on reserve–a policy that is squeezing the profit margins of a sector struggling with both cyclical and structural issues (notably over-capacity).

The ECB also said the governing council reaffirmed the current policy of buying 80 billion euros ($88 billion) of mainly government bonds a month until at least March 2017, “or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim.”

The ECB’s target is to keep consumer inflation close to, but below, 2%. It has consistently undershot that target for over three years, due largely to the collapse in oil prices and to the Eurozone’s failure to embrace growth-enhancing reforms. The annual inflation rate edged up to 0.4% in September from 0.2% in August.

ECB President Mario Draghi will hold his regular post-meeting press conference at 0930 Eastern Time.

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