View more on these topics

ECB holds rates and avoids QE boost

Mario-Draghi-700x450.jpg

The European Central Bank has decided to keep interest rates on hold at its monetary policy meeting.

The headline rate remains at zero per cent, the deposit rate at negative 0.4 per cent and the marginal lending facility at 0.25 per cent.

It has confirmed its asset purchases will remain unchanged at €80bn a month until March 2017 – or longer if needed.

In the aftermath of the Brexit vote, the ECB stated it was ready to provide additional liquidity if needed, in euro and foreign currencies.

It also confirmed its commitment to price and financial stability by whatever measures were necessary.

Eurozone GDP growth slowed to 0.3 per cent in Q2  after a recovery of 0.5 per cent in the first quarter.

IHS Global chief UK and European economist Howard Archer says the ECB had a basis to expand its monetary stimulus with more quantitative easing but not with an extra cut in interest rates.

Archer says: “Pressure for ECB action has been lifted by the purchasing managers reporting that overall eurozone services and manufacturing output growth eased back to a 19-month low in August and the European Commission reporting that overall business and consumer confidence dipped to a five-month low.

“Meanwhile, eurozone consumer price inflation was only stable at 0.2 per cent in August with core inflation edging down to 0.8 per cent from 0.9 per cent.”

Royal London Asset Management economist Ian Kernohan says: “Although growth forecasts have been trimmed, Mario Draghi did say the ECB did not discuss extending quantitative easing.

“So far the eurozone economy has dodged the Brexit bullet, however growth remains tepid, inflation is far below target and political risks are growing, including potential fallout from the Brexit negotiations.

“We still think the ECB will move to ease policy further, while the Federal Reserve is clearly biased towards tightening monetary policy and raising rates in the future.”

Recommended

How to exploit the ECB’s corporate bond buying

In April the European Central Bank  dripfed investors more details about its corporate bond buying programme, which had caught the market by surprise when it was announced a month earlier. Whether or not the expanded €80bn-a-month asset-buying programme, which already includes government debt and mortgage-backed notes, will achieve its aim of boosting the real economy, corporate […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment