The European Central Bank was seen holding monetary policy unchanged at its meeting last Thursday. The ECB President Mario Draghi was widely expected to down play the concerns over the recent weak patch of economic data from the Eurozone and the markets expected Draghi to leave the option open to end the bond purchases by the end of the year.
The Euro slips after ECB leaves monetary policy unchanged at its meeting this week which was broadly in line with the economists’ expectations.
The ECB, in its monetary policy said that “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.”
All key interest rates were left unchanged. The ECB’s refi rate was left unchanged at record lows of zero percent and the deposit rate was unchanged at -0.40% while the marginal lending facility rate was unchanged at 0.25%.
The central bank reaffirmed its commitment to maintaining the net asset purchases at the current pace of 30 billion euro with the QE program expected to run until the end of September 2018. The central bank also said that the QE program could be extended beyond the end of the year if need be.
The ECB had tweaked its monetary policy’s forward guidance at the previous meeting in March. The central bank dropped its easing bias on the asset purchases back then.
Following the monetary policy statement the ECB President held the press conference. Speaking at the press conference, Draghi said that the moderation in the recent growth in the Eurozone was partly reflecting a pull back after the economy posted a high pace of growth which was seen especially in the final months of 2017.
Draghi said that the temporary factors may also be in play contributing to the slowdown of the economy. Draghi remained optimistic by saying that by saying that “overall, however, growth is expected to remain solid and broad-based.”
Draghi said that the risks associated with the global factors continued to increase the threat of protectionist policies. He said that this could potentially pose a threat to global trade.
Recent economic data had shown that Germany, one of the largest economies had posted a slowdown in growth especially in trade export and imports. Various other indicators of the economic growth also showed a significant slowdown indicating that growth might have eased in the first quarter of the month.
Draghi however assured reporters at his press conference that the underlying strength in the euro area economy continued to support the policy makers confidence in the economy.
Officials maintained that inflation will converge towards the ECB’s 2% inflation target although consumer prices are expected to remain close to the central bank’s target rate.
The ECB had previously forecast that consumer prices will remain below the ECB’s 2% inflation target rate until 2019. Officials are hopeful that inflation will rise gradually over time and this is expected to be supported by the ECB’s monetary policy measures.
At the press conference, Draghi said that the governing council will continue to monitor the developments in the overall economy including the exchange rate as well as the financial conditions in the economy.
The euro currency pair was seen falling sharply over the day following the ECB’s monetary policy meeting. Price action was seen falling to intraday lows of 1.2098, marking a three month low on the day before pulling back modestly higher.
