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ECB ready to ease policy if needed

April 5, 2013

The European Central Bank confirmed its benchmark interest rates at record low 0.75%, but keeping its options open to increase stimulus, as was expected by the majority of market participants. ECB President Mario Draghi said that policy will stay “accommodative as long as needed” and that in fact the anticipated economic recovery in the second-half of this year is subject to “downside risks,” while euro area inflation risks remain “broadly balanced.”

Hinting at a potential future rate cut, or a range of other possible monetary policy measures, Draghi said: “we are looking at various instruments and tools.” Meanwhile, latest results of purchasing manager’s surveys, showed a continued contraction in the euro-area services sector. The PMI for services activity declined to 46.4 in March, below an initial estimate of 46.5, from 47.9 in February, London-based Markit Economics reported. The composite gauge for the services and manufacturing industries fell to 46.5 from 47.9, matching the initial estimate, remaining below 50 for14 straight months. “The recession is deepening once again as businesses report that they have become increasingly worried about the region’s debt crisis and political instability. A stronger rate of decline was recorded in France and growth almost stalled in Germany, which suggests that the only source of bright light in an otherwise gloomy region has once again begun to fade,” Markit’s chief economist Chris Williamson analyzed latest survey results.