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As expected, the European Central Bank made no changes to its monetary policy on Thursday, keeping rates at record lows. Central bank boss Mario Draghi struck an upbeat tone on the outlook for economic growth in the eurozone, but warned that an “ample degree” of stimulus is still needed to get inflation back on track.

    • 5:02 am
    • ECB leaves rates at record low as expected

    As expected, the ECB made no changes to policy, keeping its deposit rate at negative 0.4% and its main refinancing rate at 0%. The bank reiterated its guidance that rates will “remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.”

    The policy makers confirmed the decision from October to halve its quantitative easing program to €30 billion in January and let it run until the end of September 2018 or “beyond.”

    The ECB also repeated previous guidance that it stands ready to increase the size and/or duration of the QE program if the outlook for inflation becomes less favorable. Next up is ECB President Mario Draghi’s press conference at 1:30 p.m London time, or 8:30 a.m. Eastern Time.

  • There’s one key thing to watch for in the press conference in 20 min. — the ECB’s 2020 forecast for inflation.

    If the predictions indicate inflation will move closer to the bank’s target of “below, but close to 2%” in 2020, it would allow the central bank to halt its bond purchases in late 2018 and hike interest rates in the first half of 2019. However, if its 2020 forecast points to sluggish inflation for the next two years, the bank is seen as more likely to continue QE and push rate rises further into the future.

    More on that here.

  • Here’s today’s policy decision in full:

    At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

    Regarding non-standard monetary policy measures, the Governing Council confirms that from January 2018 it intends to continue to make net asset purchases under the asset purchase programme (APP), at a monthly pace of €30 billion, until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the APP in terms of size and/or duration. The Eurosystem will reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary. This will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.

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