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Thu. 9:03 a.m.: European Central Bank keeps rates low as Lagarde takes helm

In this Sept. 4 file photo, incoming President of the European Central Bank Christine Lagarde speaks to the European Parliament's Economic and Monetary Affairs Committee in Brussels. Newly appointed European Central Bank head Christine Lagarde makes her first official assessment today of the mixed bag that is the eurozone economy, which suffers from slowing manufacturing and global trade even as consumer spending helps prop up growth. (AP Photo/Francisco Seco, File)

FRANKFURT, Germany (AP) — The European Central Bank left its key interest rate benchmarks and stimulus programs unchanged today, when it held its first policy meeting under its newly appointed president, Christine Lagarde.

The bank left its deposit rate at minus 0.5 percent and its main refinancing rate at zero. The decision to not change policy follows a similar one by the U.S. Federal Reserve on Wednesday as central banks monitor the health of major economies.

Investors are now waiting for Lagarde to give her first official assessment of the European economy at a news conference in Frankfurt, Germany.

Analysts think Lagarde will stress that the economy still needs support from the central bank, and that policymakers must be on their guard against things turning out worse than expected.

Doubts have grown about how much good additional central bank action can do to support developed economies; the U.S. Federal Reserve on Wednesday kept interest rates unchanged and signaled it would leave them alone through 2020.

Chairman Jerome Powell made clear that the Federal Reserve is prepared to keep its benchmark interest rate very low through at least next year — and possibly longer.

Fueling that expectation is the growing belief of Fed officials that inflation will remain tame even as the economy keeps growing modestly and the job market remains solid. The lowest unemployment rate in a half-century — 3.5 percent — won’t necessarily fan high inflation as it might have in the past, Powell suggested at a news conference.

On Wednesday, the Fed left its key short-term rate in a low range of 1.5 percent to 1.75 percent after having reduced it three times this year. Powell had previously characterized those rate cuts as “insurance” that would offset the drags from the U.S.-China trade war and global slowdown. But on Wednesday, he boldly suggested that the Fed wouldn’t likely reverse those cuts for the foreseeable future.

“Inflation is barely moving up, notwithstanding that unemployment is at 50 year lows and expected to remain there,” Powell said at his news conference. “We have learned that unemployment can remain at quite low levels for an extended period of time without unwanted upward pressure on inflation.”

At the European Central Bank, interest is focused on Lagarde, who is presiding over her first meeting since she was appointed by European leaders as the head of the institution that sets monetary policy for the 19 euro countries that use the euro and their 342 million people. She is well known from her previous jobs as head of the International Monetary Fund and as French finance minister but investors will want to see how she communicates and explains the complexities of monetary policy to markets and voters.

Other themes that may come to the fore at her news conference are her plans for a review of the bank’s monetary policy framework and how it defines price stability, the goal it is supposed to seek under the European Union treaty. There’s also been discussion of whether the ECB should do more to support financing of projects aimed at fighting environmental pollution and climate change.

Analysts will look for signals on how she will manage dissent on the ECB’s 25-member governing council. A minority criticized the measures enacted under predecessor Mario Draghi on Sept. 12.

Those included a cut in the deposit rate to minus 0.5 percent from minus 0.4 percent. The rate is charged on excess cash left at the central bank overnight by commercial banks, so the negative rate is in effect a penalty that aims to push banks to lend the money to companies. The bank also started 20 billion euros ($22 billion) in monthly purchases of government and corporate bonds.

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