JAKARTA (TheInsiderStories) – The European Central Bank (ECB) left its key interest rates and stimulus package unchanged during President Christine Lagarde’s first policy meeting in charge on December 12th, with the main refinancing rate remaining at 0 percent and the deposit rate at -0.5 percent, while the marginal lending facility remained at 0.25 percent.
The Governing Council also said it expects interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 percent within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
The ECB’s statement reiterated that rates will stay at the current level or lower until the central bank has seen the inflation outlook “robustly converge” to that level on a consistent basis.
It also confirmed that net asset purchases had started at a monthly rate of €20 billion (US$22.3 billion) and that this will continue to run “as long as necessary” to reinforce the accommodative policy stance.
“The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates,” the bank said.
The ECB intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase program for an extended period of time past the date when it starts raising the key bank interest rates, and in any case for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation.
In September, Lagarde’s predecessor Mario Draghi launched a massive stimulus package that entailed a cut to the central bank’s main deposit rate the second round of quantitative easing in a bid to stimulate the sluggish eurozone economy.
The move proved controversial among the Council, but Lagarde offered support to the bond-buying program and record low rates back in September, highlighting that the challenges warranting a highly accommodative policy stance had not diminished.
While Lagarde was not expected to break from the trajectory set in motion by Draghi so early in her tenure, investors will be closely monitoring the semantics in her impending press conference for any hints on future policy direction.
Lagarde, the former head of the International Monetary Fund (IMF) and former French finance minister, inherited an inflation rate of 1.0 percent against an ECB target of “below but close to 2 percent” upon taking the reins in November.
One of her first moves was to announce a wide-ranging policy review, the first since 2003, with the eurozone central bank’s current stance under fire from market participants.
Written by Lexy Nantu, Email: firstname.lastname@example.org