Draghi maintains record-low interest rates across eurozone in last act as president

Outgoing ECB president Mario Draghi. REUTERS/Ralph Orlowski
  • Mario Draghi, in his last act as president of the European Central Bank, has maintained his stimulus package announced last month, keeping interest rates at a record low.
  • Rates will remain at -0.5%.
  • Christine Lagarde will now take over from Draghi as president, inheriting a struggling European economy.
  • View Business Insider’s homepage for more stories.

Mario Draghi, in his last act as president of the European Central Bank, has kept interest rates at a record low of -0.5%, maintaining the stimulus package announced last month.

In September, the ECB announced it would start a sweeping round of stimulus which included purchasing 20 billion euros’ worth of bonds a month starting in November.

Throughout his presidency, Draghi has aimed to get inflation to 2% but has failed to do so during his tenure. Inflation hovered at 0.8% in September.

Earlier on Thursday, weak data from Europe emerged suggesting its economy is close to stagnating. The IHS Markit flash PMI data showed that September to October growth was just 0.1%.

See More:

Europe just waved another red flag as new data suggests its economy is at risk of stagnating

Germany seemed especially weak, with employment falling for the first time in six years, and malaise in manufacturing spreading across the country.

Christine Lagarde, who will become the first woman to head the ECB, is set to inherit a stagnating economy and may well have to push for more stimulus to stave off recession.

“With economic growth likely to undershoot the ECB’s forecasts and fiscal policy providing very little boost to growth next year, pressure will mount on [Draghi’s] successor Christine Lagarde to oversee further policy loosening,” said Jessica Hinds, Europe economist at Capital Economics.

“We continue to expect the ECB to cut its deposit rate by 30 basis points in 2020, to -0.80%, and to increase its corporate bond purchases,” she added.

Draghi will be remembered for his “whatever it takes” attitude when it came to stabilizing the euro, a currency which was on the back foot when the Italian took office in 2011.

Lagarde earlier this week spoke on CBS’ “60 Minutes” about her new job, where she also touched on the trade war and Brexit – both factors which have hampered the European economy recently due to uncertainty.