ECB to ring in New Year with rates on hold
By Simon Morgan, AFPFRANKFURT -- The European Central Bank (ECB) will usher in 2013 with steady interest rates at its first policy meeting this year to keep up the pressure on governments to solve the debt crisis, analysts predict.
January 7, 2013, 12:20 am TWN
With ECB interest rates currently at record lows and its latest anti-crisis weapon ready and primed for action, central bank chief Mario Draghi will not pass up the opportunity to insist once again that only governments can resolve the long-running crisis, economists said.
“Whilst a (rate) cut cannot be entirely ruled out, we do not expect the governing council to change interest rates at its meeting on Thursday,” said Commerzbank economist Michael Schubert.
“On the one hand, ECB executive board members have tried to dampen rate cut speculation over recent weeks, and on the other, important sentiment indicators have increased once again,” he said.
On Friday, the closely watched Purchasing Managers Index or PMI for the entire euro area hit a nine-month high, offering hope the single currency area could be moving out of its deep double-dip recession.
Recent data for Germany, Europe's biggest economy, have also come in better than expected.
And German Finance Minister Wolfgang Schaeuble even went so far as to say he believed the embattled eurozone was now past the peak of its three-year-long debt crisis.
Market tensions have indeed eased since the ECB unveiled its anti-crisis bazooka in September, the so-called OMT bond-purchase program.
The scheme is credited with marking a turning point in financial market sentiment towards the crisis-wracked euro even though it has not actually been used.
With markets now calmer, the ECB has been able to keep its gunpowder dry, keeping interest rates at their all-time low of 0.75 percent and holding fire on other emergency anti-crisis measures as well, after pumping vast amounts of liquidity into the markets at the beginning of last year.