What's going on?

The European Central Bank did nothing at its meeting on Thursday � and its President suggested investors shouldn�t expect much of a change to its policies any time soon.

What does this mean?

The ECB has spent years trying to increase economic growth (and inflation) in the eurozone by keeping interest rates at historically low levels (click here for more background). But with growth having improved lately and overall inflation picking up, especially in Germany (the eurozone�s biggest economy), pressure is increasing on the ECB to support moderately higher interest rates. But the ECB is advocating patience, saying that there needs to be more evidence of growth throughout the eurozone first (e.g. in Italy as well as Germany).

Why should I care?

For the markets: Like other central banks, the ECB is trying to determine how much inflation is actually increasing.
Overall inflation is at multi-year highs in developed economies, but that�s partly because the oil price has doubled over the past year � and it�s feeding through to fuel prices. The �core� rate of inflation, which excludes the impact of commodity prices, is not (yet) accelerating much � although it may be on the brink of doing so, especially in the US. If core inflation increases, central banks are more likely to conclude that their ultra-low interest rate policies of recent years are having success � and start taking action that pushes interest rates up (partly because, one day, it may once want to lower them).


The bigger picture: The ECB�s President, once again, said European governments should implement big changes.
The ECB President argues that, in order to sustainably boost its economic growth, European governments must enact business-friendly reforms, like making labor laws more flexible so companies can hire new workers with less risk (and are, therefore, more likely to do so).