The European Central Bank left its record low interest rate unchanged for the second month in a row given the weaker economic outlook and the protracted debt crisis as well as the upcoming second offering of long-term loans at the end of the month.
The Governing Council led by ECB President Mario Draghi decided to maintain the main refi rate at 1 percent following its meeting in Frankfurt. The decision was in line with economists' expectations.
The rate on the marginal lending facility was held at 1.75 percent, while the deposit facility rate was kept at 0.25 percent.
The central bank had reduced the rate in November and December, reversing the two hikes undertaken last year under the former chief Jean-Claude Trichet. The bank has never cut the rate below 1 percent.
Some economists expect the ECB to trim interest rates during the first quarter and Draghi is widely expected to signal another rate cut as early as March during the post-decision press conference set to begin at 8.30 am ET.
Meanwhile, others draw attention to some of the recent euro area economic indicators, such as slowing inflation and rebounding purchasing managers' indexes, that have indicated resilience in the 17-nation economy. This could be reason enough for the central bank to stay pat next month.
"An additional ECB rate cut is likely only if and when the Eurozone economy deteriorates further," ING Bank Senior Economist Carsten Brzeski said in a note earlier in the week.
Further, the ECB is set to hold its second tender of three-year loans to banks on February 29. The bank allotted a record EUR 489 billion in the first offering of these loans in December.
Analysts see no pressure on the central bank to do anything further, but to wait for the results of the steps already implemented. The ECB Chief has already expressed hope that there would be 'substantial demand' for the loans.
Draghi is also expected to be quizzed today on what the central bank could do to improve the Greek situation. Yesterday, three Greek political parties in the coalition government of Prime Minister Lucas Papademos failed to reach a consensus on the adoption of the largely unpopular austerity measures demanded in return for a new international bailout package to avoid a default.
"President Draghi will no doubt use the following press conference to stress the effectiveness of its latest banking support measures," Jonathan Loynes, Chief European Economist at Capital Economics, said ahead of the announcement.
"However, he is likely to resist the idea that the ECB should take a haircut on its holdings of Greek government debt."
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.