The European Central Bank, surprising very few people, has announced that it is to keep the interest rates for the eurozone unchanged at 1 per cent. Mario Draghi, the president of the bank, warned last week that it could not "fill the vacuum" created by politicians' inactivity. Slate's Matt Yglesias interprets the warning in a somewhat more negative light, writing:

Central bankers would like you to believe that their job is really complicated and difficult, but done properly it's very simple. If the outlook for growth is worsening and global commodity prices are tumbling, you need easier money. If there's no economic slack and additional demand is just turning into a higher price level, you need tighter money. It's quite clear which situation Europe is in, so the job is to ease monetary conditions. 

Instead the ECB seems to have decided that its job is to play nanny to a few dozen querrelsome electoral democracies and dole out appropriate monetary conditions as a kind of reward for good behavior: "Implement the labor market and budget reforms we favor and we'll give you a happy meal."

Even during the worst parts of the recession, the ECB never cut the main interest rate for the eurozone below 1 per cent. The Financial Times adds:

So far the ECB has forecast a stabilising of economic activity in the eurozone at low levels. But its expectations of a gradual economic recovery this year have been challenged by recent data.

Eurozone purchasing managers’ indices showed activity contracting sharply at the start of the second quarter, while unemployment in the currency bloc reached a euro-era high of 11 per cent of the workforce in April. M3, the broad money supply measure, watched by the ECB as an inflation and activity indicator, also decelerated. As the council met, Germany reported the country’s industrial production had fallen by 2.2 per cent in April compared with the previous month.

Further strengthening the case for an interest rate cut have been signs that eurozone inflation is decelerating significantly – even if, at 2.4 per cent in May, it remained above the ECB’s target of an annual rate "below but close" to 2 per cent.