Economists were expecting no change to current rates, with the headline deposit rate remaining at minus 0.4 per cent and a 0.25 per cent rate on sums borrowed from the ECB by banks.
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The bank will continue this quantitative easing programme until March 2017 and beyond “if necessary” as it tries to stimulate economic activity across the eurozone.
Financial markets had not expected any action from the ECB but saw Draghi’s comment that the bank had a “readiness, willingness and ability” to act as a clear sign that further stimulus was on the way.
“Over the coming months, when we have more information, including new staff projections, we will be in a better position to reassess the underlying macroeconomic conditions, the most likely paths of inflation and growth, and the distribution of risks around those paths”. This is the first public acknowledgment from Draghi that Brexit is a bearish factor, said James Cordier, the founder of Optionsellers.com in Tampa, Florida.
Markets now turn their attention to ECB President Mario Draghi’s 1230 GMT news conference, where he may discuss the impact of Britain’s decision to leave the European Union, the state of Italian banks and the expected difficulty in finding enough bonds to buy under its asset purchase program. Our call is that the QE programme will be boosted temporarily to EUR100bn for the rest of 2016 and that the programme will be extended until September 2017.
Prior to the vote to leave the EU, Mr Draghi had speculated that an exit could cut eurozone growth by between 0.2% and 0.5% over three years. The ECB board remains “ready to use all available instruments for the duration of its mandate”, Draghi said.
What does the ECB’s latest bond-buying plan mean for U.S. corporates?
Mario Draghi said markets had displayed “courage and resilience”. Further ECB easing and US growth outperformance should drive EUR/USD lower in the autumn.
It has cut its benchmark lending rate to zero, and is buying 80 billion euros ($88 billion) in bonds each month, a step that pumps newly created money into the economy.
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The survey comes in the same week that the International Monetary Fund issued a stark warning about the impact of Brexit on global growth.
