The ECB’s decision-making governing council voted to hold eurozone interest rates unchanged at their current all-time lows at its regular policy meeting on Thursday.
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However, investors had been looking to ECB chief Mario Draghi to hint strongly at a further loosening in monetary policy in September to deal with any slowdown caused by uncertainty after Britain’s shock vote on June 23 to quit the European Union.
Such a measure could prove highly unpopular, with citizens in many countries still angry at having to “bail out” banks following the global financial crisis of 2007-08.
He said central bank measures in the wake of the result – such as the Bank of England’s Mark Carney saying it was ready to inject £250bn into markets – had helped to contain market stress.
During that meeting, the central bankers made a decision to leave the ECB’s benchmark refinancing rate untouched at 0 percent, where it’s been since March.
As we expected, the European Central Bank stood on hold after the July monetary policy meeting: official interest are unchanged, the Asset Purchase Programme will continue at the same pace over the same time-horizon, ie.at least until the end of March 2017. The ECB announced a big stimulus package back in March that has failed to deliver much in terms of inflation so far – of course it is still early days – and the euro is now trading higher than it was prior to the “bazooka” as it has for most of the last four months.
It repeated that its 80 billion euro ($88 billion) per month asset-buying program – which Draghi deemed “quite successful” – would run until March 2017, or beyond if necessary, until it sees an upward adjustment of inflation toward its target. Early post-Brexit data, such as Germany’s ZEW sentiment indicator and euro zone consumer confidence figures, suggest a significant drop in confidence.
Indeed, while analysts polled by Reuters cut their 2017 euro zone growth forecasts to 1.3% from 1.6%, they left their inflation projection unchanged at 1.3%, a mixed reading for the European Central Bank, which targets inflation at just below 2%.
The European Central Bank (ECB) has left rates unchanged across the Eurozone, in line with analysts’ expectations.
Some analysts had speculated that ructions in financial markets post-Brexit could force an extension in the size or scope of the ECB’s €80bn a month monetary easing programme, which is created to pull the single currency zone out of deflation.
But banks are generally in much better shape than in 2009 and have substantially strengthened their capital buffers, Draghi said.
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The bank president today said monetary policy can be be supportive of other policies that are needed. Gold is also approaching a key turn on its reversal from the highs around 1375 seen earlier this month, next support at 1308.
