After digesting all the news from the event, the markets were probably disappointed that the European Central Bank declined to add more stimulus despite cutting growth forecasts and highlighting downside risks to the Eurozone economy. “The governing council tasked the committees with evaluating the options that ensure a smooth implementation of our purchase programme”, he said after the decision.
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FRANKFURT, Germany (AP) – The European Central Bank is weighing whether to increase its efforts to boost stubbornly low inflation in the 19-country eurozone at Thursday’s meeting of its governing council.
He reiterated that the bank will leave its quantitative easing (QE) programme running until March 2017 – or until it sees a “sustained adjustment in the path of inflation consistent with its inflation aim” – but said the governing council had not discussed whether to extend QE. Officials have previously made technical changes including raising the proportion of each bond issue they can buy, and adding asset classes such as regional and corporate debt.
A hint at the possibility for more near term actions would reduce the chances of a squeeze on bearish Euro trades and also reduce bear bets on equities.
He added that eurozone governments that have the capacity to spend more on investments in infrastructure should do so. United States stocks have been trading in a tight range in recent months amid growing uncertainty over the USA central bank’s interest-rate decision expected later this month.
Facing anaemic growth and inflation, the ECB is buying 1.74 trillion euros worth of bonds, holding rates deep in negative territory and giving banks free loans, hoping to end the bloc’s almost decade-long economic malaise with an infusion of cheap credit.
“Not getting what is expected is always going to be disappointing, and that has sort of manifested itself a little bit more in currency markets than it has in equity markets”. “Our monetary policy is effective”. Some analysts thought the bank might commit to a longer program.
On June 8, the European Central Bank started to buy back bonds and corporate debt from companies, in addition to financial institutions.
EURO SOLID: Europe’s single currency maintained its firm tone after the decision, trading 0.5 percent higher at a two-week high of $1.13.
While the eurozone is enjoying moderate growth, inflation continues to lag well below target, despite a raft of stimulus measures, and unemployment is high at 10.1 percent and falling only slowly. In EIA’s short-term market report from earlier this week, global consumption rates next year are expected to be lower than for 2016.
The rate on deposits from commercial banks was also unchanged at minus 0.4%.
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As has been his wont at recent press conferences, Draghi turned his attention to the region’s governments and the role they have to play in stimulating growth and inflation. So far, economic data do not suggest a major impact.
