ECB Leaves Rates Steady

The ECB left its benchmark refinancing rate on hold at a record low of 0.0% on April 21st 2016, following a 5bps cut in the previous month and in line with market forecasts. Rates are expected to stay at present or lower levels for an extended period of time, President Mario Draghi said. The asset purchase programme was kept at €80 billion a month but the central bank said will start buying corporate bonds in June.

The interest rates on the marginal lending facility and the deposit facility were also left unchanged at 0.25 percent and -0.40 percent respectively.

Excerpts from the Introductory statement to the press conference:

Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases. Regarding non-standard monetary policy measures, as decided on 10 March 2016, we have started to expand our monthly purchases under the asset purchase programme to €80 billion, from the previous amount of €60 billion. As stated before, these purchases are intended to run until the end of March 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. Moreover, in June, we will conduct the first operation of our new series of targeted longer-term refinancing operations (TLTRO II) and we will commence purchases under our corporate sector purchase programme (CSPP).

Looking forward, it is essential to preserve an appropriate degree of monetary accommodation as long as needed in order to underpin the momentum of the euro area’s economic recovery and in order to accelerate the return of inflation to levels below, but close to, 2%. The Governing Council will continue to monitor closely the evolution of the outlook for price stability and, if warranted to achieve its objective, will act by using all the instruments available within its mandate. In the current context, it is crucial to ensure that the very low inflation environment does not become entrenched in second-round effects on wage and price setting.

The risks to the euro area growth outlook still remain tilted to the downside. Our recent monetary policy decisions have improved overall financing conditions, which should support the outlook for consumption and investment. However, uncertainties persist and relate, in particular, to developments in the global economy and to geopolitical risks.

Looking ahead, on the basis of current futures prices for energy, inflation rates could turn negative again in the coming months before picking up in the second half of 2016. Thereafter, supported by our monetary policy measures and the expected economic recovery, inflation rates should recover further in 2017 and 2018.

ECB Leaves Rates Steady

ECB | Joana Taborda |
4/21/2016 2:08:46 PM