ECB Keeps Markets Guessing On Tapering
20 Juillet 2017 - 10:34AM
RTTF2
There was no surprises from the European Central Bank on
Thursday as it left its key interest rates and massive stimulus
unchanged for an eleventh straight session, and also kept the
forward guidance intact, thus retaining the downward bias on asset
purchases.
The Governing Council, led by ECB President Mario Draghi, kept
all its three interest rates unchanged during the policy session in
Frankfurt.
The main refi rate was held at a record low zero percent and the
deposit rate at -0.40 percent. The marginal lending facility rate
was kept at 0.25 percent.
The bank also retained its asset purchases of EUR 60 billion a
month till December 2017, or beyond, if necessary. The size was
reduced in March from EUR 80 billion.
"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," the bank said in
a statement.
The bank had dropped its easing bias on rates in the June policy
session and some analysts had expected a similar move from the ECB
on asset purchases this month.
Asset purchases would continue beyond 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 bank said.
Retaining its downward bias on the asset purchases, the ECB
reiterated, "If the outlook becomes less favorable, 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 our view, this is a clear sign that the ECB does not want to
pour more oil on the small taper tantrum fire seen in financial
markets over the last few weeks," ING-diba economist Carsten
Brzeski said.
"The ECB is staying on the dovish side and does not seem to be
in a hurry to move towards tapering."
Economists widely expect Draghi to tread very carefully when he
speaks in the post-decision press conference.
After his comments at a central banking forum in Sintra,
Portugal in late June, fed market expectations of an imminent
tapering and send yields and the euro soaring, Draghi is set to
measure each word he speaks so as to avoid the kind of market
turbulence dubbed "taper-tantrum".
Draghi and his colleagues are expected to drop any hint of a
gradual withdrawal of stimulus, or tapering, in September, when a
possible tapering move is likely to be announced for January after
the end of the on-going round.
Some analysts expect Draghi to hint that an interest rate hike
will come only after the withdrawal of stimulus.
Eurozone inflation eased to a six-month low of 1.3 percent in
June, while ECB targets to keep it "below, but close to 2 percent."
However, the policy-relevant core inflation rose to 1.1 percent
from 0.9 percent.
Meanwhile, confidence indicators and other survey measures
suggest accelerating growth momentum in the 19-nation economy.
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