THE European Central Bank kept interest rates unchanged on Thursday but investors will be looking for any signs it is preparing for a cut in coming months to help lift the euro zone out of recession. It’s key interest rate is at a record low of 0.75pc – tiny, but still the highest level among the world’s major central banks.
As the world recovers from the financial crisis, the ECB has lent less support to the economy than its peers in Japan, the United States or Britain, who have launched massive asset purchase programs and cut rates closer to zero.
Japan went a step further on Thursday. The Bank of Japan’s new governor, Haruhiko Kuroda, shocked markets with a radical overhaul of its policymaking, adopting a new balance sheet target and pledging to double its government bond holdings in two years as it seeks to end nearly two decades of deflation.
The unexpected scope of the changes drove the yen lower and knocked the 10-year bond yield to its lowest in a decade.
Earlier in the week, ECB Executive Board member Benoit Coeure had warned against countries directly pursuing overt competitive devaluations, especially if other central banks had limited room to maneuver.