European Central Bank keeps interest rates unchanged

11 Marcha, 2018, 00:30 | Author: Arnold Perez
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ECB President Mario Draghi is to hold a news conference after a meeting Thursday of the bank's 25-member governing council. The interest rates on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility remain unchanged - 0.00%, 0.25% and -0.40% respectively. Economists largely predicted no change in guidance this month, expecting instead to have to wait until June to receive a clearer indication. It continued to state that net asset purchases, at €30bn a month, would run until the end of September 2018, or until the council sees "a sustained adjustment in the path of inflation consistent with its inflation aim". The bank dropped the line that it would stand "ready to increase the asset purchase programme (APP) in terms of size and/or duration", if the economic outlook became "less favorable". Euro/dollar traded lower at 1.2370 (-0.34%) ahead of the European Central Bank rate announcement where any clues on the ECB's plans to change its forward guidance on monetary policy could bring fresh volatility to the currency.

A stimulus exit would likely send interest rates and the euro higher.

At the same time the US Dollar is a holding pattern this morning as markets remain cautious following Trump's signing of an order introducing trade tariffs on metal imports.

"They toned down the easing bias but there is still a willingness to ease and the tone of Draghi's comments was still dovish, stressing that there is still not a convincing uptrend in inflation", said Chris Scicluna, head of economic research at Daiwa Capital Markets.

Europe's top monetary official criticized U.S. President Donald Trump's proposal to put tariffs on steel and aluminum imports as a "dangerous" unilateral move.

EUR/USD Forecast: US Employment Data to Bolster the US Dollar?

Analysts said reports that Italy's centre-right alliance was reaching out to lawmakers from the Democratic Party to seek support for a broad governing alliance after Sunday's inconclusive election was also supporting Italian debt.

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During the subsequent European Central Bank press conference, Draghi was able to tone down any hawkishness in the statement in his responses to questions from the assembled group of journalists. But he said such disputes should be worked out among trade partners, not decided by measures initiated from one side.

Markets still awaited developments in the ongoing drama over tariffs and trade wars.

"If anything the European Central Bank could be facing a bit of a problem in terms of its attempts to draw back from its easy monetary policy, particularly since the data isn't moving its way".

As the economic recovery continues to gain momentum in the euro area, there has been increasing speculation about the winding down of ECB's monetary easing policies.

March U.S. Dollar Index futures settled at 90.156, up 0.549 or +0.61%. The FTSE 100 index closed up 0.2% at 7,157.84 on Wednesday.

"The ECB gave a reassuring message that QE would not come to a swift end in September and stated that the discussion on rate hikes and their timing had just started", said Commerzbank rates strategist Rainer Guntermann.

The Stoxx Europe 600 index climbed 1.1% to 376.62, the best close since February 28, FactSet data showed.

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