European Central Bank still doing nothing as region sinks into recession

March 7, 2013
Obsession
Euro Crunch
March 7, 2013

The European Central Bank decided to keep its target rate unchanged at 0.75% in its latest decision, continuing a policy that has done little to save the euro zone from a deepening recession. Although the central bank stepped in to preserve the currency late in 2011, it once again refused to go beyond that role by bolstering economic growth.

That’s little surprise; its mandate commits it to preserving price stability (essentially, protecting the region from inflation or deflation) without regard to economic growth. At 1.8% in February—down from 2.0% in January and 2.2% in December—the ECB has only just hit its inflation target of just less than 2%.

Meanwhile, the euro zone economy shrunk in all four quarters of 2012, and by a full 0.9% in the fourth quarter of 2012. There’s little to suggest this trend is slowing down, particularly as political uncertainty sweeps across Italy and Spain.

euro area gdp growth

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