The European Central Bank's decision to leave interest rates unchanged came as little surprise. The broad consensus before the meeting of the bank's governing council in Frankfurt this morning was that there would be little or nothing of significance to discuss.
President Mario Draghi announced without any fanfare that the ECB's key interest would remain unchanged. The rates on the main refinancing operations and on the marginal lending facility and the deposit facility will stay at 0.00%, 0.25% and -0.40% respectively.
Rates will stay at these levels for an extended period of time, added president Draghi. This will be well beyond the planned end of the €60bn a month asset purchase or quantitative easing (QE) programme. This is currently scheduled to begin winding down in December this year.
It could be extended if circumstances require it. The medium-term outlook continues to be encouraging for a number of countries and sectors, said the ECB president.
Mario Draghi, courtesy of the ECB
The recent strengthening of the euro is presenting complications. President Draghi expressed a certain dissatisfaction with inflation figures and said that recovery remains dependent upon monetary policy. The exchange rate is not a policy target.
But it is important, he emphasised. “We will have to take this into account in our information set in making policy decisions,” he said. “Following the recent appreciation monetary conditions in the eurozone undoubtedly tightened but they remain accommodative.”
Consumption is doing well because of increased household disposable income, helped by low interest rates. Exports are also doing well, he added.
ECB not ready: State Street
Timothy Graf, courtesy of State Street
Timothy Graf, head of macro strategy for EMEA at State Street Global Markets said the comments from the ECB president confirm the central bank is not ready to offer any details on the end of non-standard monetary policies.