The remarks, which followed the Bank’s decision to keep its key interest rates unchanged – including a -0.4% charge on its deposit facility – briefly lifted the single currency past 1.1039 against the USA dollar, the highest in almost a month.
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Members of the governing council voted not to make any changes to the ECB’s ultra-loose monetary policy, which consists of record low interest rates, cheap loans to banks and a multi-billion-euro bond-buying program.
EUR/USD initially rose 0.5 percent to 1.1040 on Draghi’s comments that an extension was not discussed but eased back to a four-month low of 1.0921 as markets are increasingly pricing in more easing.
He says: “We briefly talked about low rates and the conclusion was that they don’t hinder the transmission of our monetary policy”.
The ECB’s Governing Council chose to maintain its asset purchase programme at €80 billion per month until March 2017, as expected by analysts.
Attention will now turn to a news conference by bank President Mario Draghi for any clues about whether the ECB will extend its 80 billion euros ($88 billion) in monthly bond purchases beyond March 2017, currently the earliest possible end date. However, market participants await for confirmation from Draghi relative to the recent speculation that the bank could begin pointing out its bond purchases. The key indicator for the European Central Bank inflation has even ticked up a bit, to an annual 0.4 percent. The projections will be crucial for the Governing Council to decide on the terms and conditions of the QE program.
The ECB is tasked with getting the annual rate of inflation running at just below 2 percent. The benchmark rate will stay at zero. That would argue against any move to taper the bond purchases now.
FRANKFURT-Inflationary pressures in the eurozone remain very weak, a quarterly survey of forecasters published by the European Central Bank showed Friday. Its current quantitative easing (QE) programme expires in March 2017, and there have already been hints that it might be extended.
“We also have a slightly firmer dollar on our hands, and I suspect the drop in the euro-dollar rate is as much to do with that as anything else”, said Ray Attrill, global co-head of foreign-exchange strategy at National Australia Bank Ltd in Sydney.
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In the comment on the program, Draghi said that an “abrupt” ending to the bond purchases is unlikely to happen. Although expected, the European Central Bank announcement sent the euro to its lowest point since March, cooling investor risk appetite.
