The European Central Bank left its quantitative-easing programunchanged as policy makers wait to see if a pickup in inflationwill be sustained.

The Governing Council reaffirmed its December decision thatasset purchases will be reduced to 60 billion euros ($64 billion) amonth from April, from 80 billion euros currently. Policymakers also kept the main refinancing rate at zero and the depositrate at minus 0.4 percent, as predicted by all economists in aBloomberg survey.

The first policy decision of 2017 comes six weeks after Draghideclared the threat of deflation to be almost vanquished. Pricegrowth in the region is starting to accelerate after almost fouryears of undershooting the ECB's goal, and in a sign that sentimentis gradually changing, Executive Board member Benoit Coeureacknowledged last month that the balance of risks to inflation isshifting.

The continuation of stimulus is likely to draw criticism inGermany, the euro area's biggest economy, where there was mediaoutrage after the nation's inflation rate more than doubled to 1.7percent in December. The ECB's policies have come under attack frompoliticians ahead of elections scheduled for this year.

The government will face “political problems” explainingECB monetary policy to the public, Finance Minister WolfgangSchaeuble said in a Bloomberg Television interview after thedecision. Speaking at the World Economic Forum in Davos,Switzerland, he added that “it is in Germany's interest that theeuro zone as a whole is successful.”

Euro-area consumer prices rose an annual 1.1 percent inDecember, more than twice as much as in November and the most since2013. Even so, the rate remains well below 2 percent, and officialshave expressed concern that the increase so far is largely due tooil. Core inflation picked up only slightly to 0.9 percent, stilllacking a convincing upward trend.

There is little sign that the Governing Council is ready toendorse more hawkish language just yet, even after a jump ininflation to 1.7 percent in Germany, the region's largest economy,sparked media outrage.

While Bundesbank President Jens Weidmann has said the ECB should“tighten the reins” as soon as feasible, Austria's Ewald Nowotny,France's Francois Villeroy de Galhau and Executive Board memberYves Mersch have all indicated that they see worries about a returnof inflation as exaggerated.

Bottom of Form

Political uncertainty in the year ahead may also give officialsreason to be cautious. Economies including Germany, France and theNetherlands will hold elections in which euro-skeptics might gainincreased support, and the U.K. is set to start formal talks onleaving the European Union. A further risk comes from anyprotectionist action by Donald Trump, who will be inaugurated asU.S. president on Friday.

Three-quarters of economists surveyed by Bloomberg before the decision saidthe ECB's next major change to stimulus will be announced no soonerthan September.

Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.