Wednesday 7 December 2016

Draghi keeps rate at zero, but offers no clue on QE

Balazs Koranyi in Frankfurt

Published 09/09/2016 | 02:30

Mario Draghi, president of the European Central Bank, listens to Christine Graeff, the bank’s director general for communications
Mario Draghi, president of the European Central Bank, listens to Christine Graeff, the bank’s director general for communications

The European Central Bank (ECB) held interest rates at record lows yesterday and kept the door open to more stimulus but gave few hints about its next move, disappointing markets that had priced in a decisively dovish tone.

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ECB President Mario Draghi said the ECB will study policy options to ensure it can pursue its unprecedented money- printing programme but did not hint at the anticipated extension of its asset purchases, maintaining the March end-date in an unexpectedly balanced message.

Facing anaemic growth and inflation, the ECB is buying €1.74 trillion worth of bonds, holding rates deep in negative territory and giving banks free loans, hoping to end the bloc's nearly decade-long economic malaise with an infusion of cheap credit.

It has managed to prop up growth, but not enough, and even shaved some of its forecasts yesterday, reinforcing market expectations that more monetary stimulus is just a matter of time.

Forecasts

"For the time being, the changes (in forecasts) are not substantial (enough) to warrant a decision to act," Draghi told a news conference, adding that an extension of the ECB's asset buys was not discussed.

The euro zone's central bank kept its deposit rate at -0.4pc, meaning it is charging banks for parking cash overnight. The main ECB refinancing rate, which determines the cost of credit in the economy, is unchanged at 0.00pc.

In the biggest clue about its next step, Mr Draghi said the ECB had asked internal committees to look at various options to ensure the smooth running of asset buys. He had used similar language at the October 2015 meeting, which was followed by an easing package six weeks later. (Reuters)

Irish Independent

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