ECB keeps key interest rates unchanged

Photo by ECB

JAKARTA (TheInsiderStories) – The Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively, said the central bank in a press statement.

The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 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.

The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.

In the press conference on the ECB’s decission, President of ECB Mario Draghi said the board decided the rates to remain at their present levels for an extended period of time, and well past horizon of our net asset purchases. He stressed it, that the information since ECB’s last monetary policy meeting confirms a stronger momentum in the euro area economy.

“We consider that the risks to the growth outlook are now broadly balanced. Economic expansion has yet to translate into stronger inflation dynamics. Underlying inflation continues to remain subdued. Very substantial degree of accommodation still needed for underlying inflation pressures to build up and support headline inflation,” said Draghi.

If needed, He continued, ECB’s stand ready to increase our asset purchase programme in terms of size and/or duration.

Economic growth prospects continue to be dampened by a sluggish pace of implementation of structural reforms. GDP projections: 1.9% in 2017 [1.8% in March], 1.8% in 2018 [1.7%], 1.7% in 2019 [1.6%]. HICP projections: 1.5% in 2017 [1.7% in March], 1.3% in 2018 [1.6%] and 1.6% in 2019 [1.7%].

Measures since June 2014 continue to significantly support borrowing conditions for firms, including SMEs, and households. Other policy areas must contribute much more decisively to strengthening economic growth. We need to be patient and we need to be confident.

“We are confident inflation will converge to our objective in a durable way. We need to be persistent, we need to accompany the recovery with our monetary policy. Economic and Monetary Union is incomplete, new work on completing it is to be welcomed. The programme is running smoothly and it has enough flexibility,” Draghi .