The European Central Bank have said that they will be delaying a rate rise, as it announced cuts it its inflation and growth forecasts for 2015 yesterday.
The ECB will be keeping its main interest rate on hold at 0.05% for the foreseeable future, citing problems with China as the reason for Europe’s economic recovery continuing “at a somewhat weaker pace than expected”.
The euro fell sharply as ECB President Mario Draghi revised growth expectations, dropping a cent against the dollar to $1.1127. The figures were moved down to 1.4% in 2015 and 1.5%, and 1.7% in 2016, compared with its previous projection of 1.9%.
He also admitted that inflation could turn negative in the coming months.
“Lower commodity prices, a stronger euro, somewhat lower growth, have increased the risk to a sustainable path of inflation towards 2%,” he told a news conference in Frankfurt.
Draghi also hinted that the bank could expand its stimulus programme if necessary, continuing its already massive bond-buying program which underscoring an increasing divergence in the monetary policies of the world’s largest central banks.
