The interest rates on the main refinancing operation, on the marginal lending facility and on the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.
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After a mixed bag of data over the past month in Europe, including poor German industrial orders this week, many market participants had speculated the European Central Bank might take additional actions in order to stimulate Euro Zone growth.
In his effort to underline governments’ responsibilities, Draghi read from this week’s joint statement issued by the Group of 20 most advanced nations in which they said they were ready to use “all policy tools – monetary, fiscal and structural” to improve growth.
Earlier Thursday, the central bank kept its key interest rates on hold and decided against extending the duration of its bond-buying stimulus program beyond March 2017.
“The (ECB). does not mind holding back with respect to (using) more aggressive measures, but the (bigger) question is how long they can afford to wait given that they are very late in the game of QE”, said ThinkMarkets analyst Naeem Aslam. He had used similar language at the October 2015 meeting, which was followed by an easing package six weeks later.
Indeed, fresh quarterly forecasts to be unveiled by Draghi, could show a slightly lower path for underlying inflation while recent research published by the European Central Bank suggested that long term inflation expectations are drifting lower, an indication of waning confidence in the ECB’s policies.
The German 30-year bond yield extended its rise to 0.61 percent and was up 10 basis points on the day. So it is keeping its options open.
Inflation has undershot the ECB’s target for more than three years and is expected to stay below target for years to come as growth remains weak, unemployment hovers near 10% and the economy struggles with large slack.
Draghi also took pains to reassure markets that he would not hesitate to ease policy if the inflation outlook warranted it.
Stocks of USA crude have been at record highs in the past two years, thanks partly to an output-boosting shale oil boom. The ECB has already had to stop purchases in Estonia and found no bonds to buy in Luxembourg last month.
Bigger changes could involve the purchase of new types of assets, like bank bonds, non performing loans or in the extreme case, stocks. When asked about whether the European Central Bank had talked about extending quantitative easing at its meeting, he said “we did not discuss” anything in that regard.
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Confidence in the German economy during August also dived at the fastest rate since the height of the eurozone debt crisis in 2012, as measured by the economic institute Ifo survey. The ECB Governing Council stressed it stands ready to act, if necessary.
