ECB Leaves Rates Unchanged

Draghi stakes his credibility on plan to buy bonds.

The European Central Bank refrained from cutting interest rates today as President Mario Draghi prepares to unveil a bond-purchase plan to save the euro.

Policy makers meeting in Frankfurt left the benchmark rate at a record low of 0.75 percent, as predicted by 28 of 58 economists in a Bloomberg survey. The remainder forecast a quarter-point cut. Investors are focused on Draghi’s press conference at 2:30 p.m., when he may announce details of a plan to intervene in bond markets to help restore transmission of ECB interest rates.


His blueprint, sent to council members just two days ago and opposed by Germany’s Bundesbank, proposes unlimited buying of government debt with maturities of up to about three years, two central bank officials said yesterday on condition of anonymity.


Prime Minister Mariano Rajoy and German Chancellor Angela Merkel meet in Madrid today to discuss the euro crisis and are due to hold a joint news conference at about 2:30 p.m., the same time Draghi speaks.

Mandate Breach?

“An unlimited and far-reaching intervention by the central bank by buying sovereign debt is beyond the mandate of the ECB,” Commerzbank AG Chief Executive Officer Martin Blessing said at a banking conference in Frankfurt yesterday. “I cannot image how one can build trust and a strong currency union by violating the law. There is the danger that we keep on buying time while the pressure to reform is declining.”

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