ECB Holds Rates, QE Unchanged As Expected

ECB Holds Rates, QE Unchanged As Expected

The European Central Bank left its key interest rates and massive stimulus unchanged on Thursday, in line with economists' expectations.

The Governing Council, led by ECB President Mario Draghi, kept all its three interest rates unchanged for a twelfth consecutive policy session.

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 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 ECB said in a statement.

The bank also retained its monthly asset purchases of EUR 60 billion that are set to run till December 2017. The size was reduced in March from EUR 80 billion.

The current asset purchases “are intended to run until the end of 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.

“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,” the ECB added.

Focus shifts to Draghi's post-decision press conference that is set to begin at 8.30 am ET in Frankfurt, when he is expected to signal what lies ahead for the ECB's massive stimulus – a tapering announcement in October or further delay in exit, thanks to a strong euro.

Draghi is set to unveil the latest ECB Staff macroeconomic projections during the press conference. Eurozone growth forecasts are likely to be raised further, while the inflation projections may come in for another trimming.