ECB keeps all rates on hold, leaves door open to further easing
By Alexander Bueso
Date: Thursday 27 Apr 2017
(ShareCast News) - The European Central Bank kept all its policy interest rates unchanged, reiterating that rates might yet go lower still and that quantitative easing could be extended beyond the current scheduled end-date of December 2017, if necessary.
Rate-setters in Frankfurt decided to keep their main policy lever, the refi rate, at 0.00%.
The interest rate on the marginal lending facility was unchanged at 0.25% and that on funds left on deposit at the ECB at -0.40%.
Economists had expected no interest changes.
In its policy statement, the Governing Council says it continues to expect interest rates where they are or lower for "an extended period of time and well past the horizon of the net asset purchases".
Its programme of quantitave easing, currently running at €60.0bn a month, will be maintained "until the end of December 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 ECB also said.
"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."
Commenting on the ECB's decision, Naeem Aslam, chief market analyst at Think Markets, said: "No new drum beat or drama in today's ECB announcement. The French election has them on a tight leash. We expect the ECB will have zombie like moves even after the French elections. They cannot afford to jeopardise their hard labour. Therefore, if you think the bank would be aggressive or overly hawkish, then perhaps investors are living in La La land."
For his part, Jack Allen, European economist at Capital Economics said: "The ECB's statement following its policy meeting suggests that the Bank is still some way from tapering its asset purchases or raising interest rates. [...] If anything, its forward guidance was perhaps a little more dovish than some had anticipated given the recent strength of the economy.
"That said, we suspect that in June the Bank will drop its reference to lower interest rates, and see it ultimately tapering asset purchases in the first half of next year."
On 25 April, Reuters cited three sources at or near to the GC according to whom "many rate setters see scope for sending a small signal in June towards reducing monetary stimulus."
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