JAKARTA (TheInsiderStories) – The European Central Bank (ECB) held interest rates at current levels and left its stimulus measures unchanged during its January policy meeting on Thursday (01/23). The bank’s governing council voted unanimously that the interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility will remain unchanged at 0.00 percent, 0.25 percent, and -0.50 percent respectively.
The officials are widely expected to launch a review of the ECB’s monetary policy strategy. However, during the press conference, President Christine Lagarde failed to provide any new information on the monetary policy, economic outlook, and strategic review and said details of the review of the ECB’s monetary strategy will be made available only later.
“In the light of the continued subdued inflation outlook, monetary policy has to remain highly accommodative for a prolonged period of time to support underlying inflation pressures and headline inflation developments over the medium term,” Lagarde said.
The president added that incoming data is in line with the ECB baseline scenario and there are some signs of a moderate increase in underlying inflation. She added that the governing council stands ready to adjust the instruments if needed.
The governing council expects the key ECB 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, according to its accompanying statement.
The policymakers will continue to make net purchases under its asset purchase program (APP) at a monthly pace of €20 billion (US$22.3 billion), and the ECB reiterated on Thursday that this will continue to run as long as necessary to reinforce the accommodative impact of its policy rates and to end shortly before it starts raising the bank’s key interest rates.
The central bank intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation.
The strategic review launched Thursday was one of the first moves announced by Lagarde upon starting her tenure, with the central bank’s persistently low-interest-rate stance under fire from market participants who say it has become detrimental to economic growth.
In September last year, Lagarde’s predecessor Mario Draghi cut the ECB’s deposit rate by 10 basis points to its current level and launched a massive new QE program in a bid to stimulate the eurozone economy and push towards the central bank’s inflation target. Lagarde then inherited an inflation rate of 1.0 percent in the eurozone upon taking the reins in November.
Written by Lexy Nantu, Email: email@example.com