european central bank....euro (bolja).jpg
Photograph: Photo by Volker Kannacher, used under CC BY-ND

The European Central Bank announced Thursday that it will begin buying corporate bonds from next week after the bank left its benchmark interest rate on hold at zero.

The ECB said it will begin purchasing investment-grade corporate bonds from June 8 as part of its 1.74 trillion euro (1.94 trillion dollar) package of stimulus measures aimed at keeping the 19-member eurozone on an economic growth path and ending weak consumer prices.

The corporate bond purchases will be the first in ECB history. Until now the Frankfurt-based asset-buying plans have focused on government bonds.

Analysts also expect ECB chief Mario Draghi will announce that the bank has raised its inflation forecast for this year and 2017 as part of its new economic forecasts, which will include an update of the bank's predictions for growth.

Data released this week by the European Union's statistics office Eurostat showed consumer prices standing at minus 0.1 per cent in May - well below the ECB's annual inflation target of just under 2 per cent.

But the recent spike in oil prices is widely predicted to result in Draghi unveiling a higher inflation forecast.

In addition to leaving the refinancing rate at zero, the ECB said Thursday it had decided to hold its deposit rate at minus 0.4 per cent and the marginal lending rate at 0.25 per cent.

While the deposit rate is what the ECB charges financial houses for parking funds at the bank, financial institutions use the marginal rate to borrow from the ECB overnight.

Thursday's meeting of the ECB's 25-head governing council was held in Vienna as one of its regular out of town meetings.

The ECB meeting also coincided with an OPEC gathering in the Austrian capital.

The oil producers' cartel meeting along with the ECB's expected higher inflation forecast comes in the wake of a rebound in oil prices, with global benchmark Brent crude breaching the key 50-dollars-a-barrel mark last Thursday for the first time since November.

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