European Central Bank keeps rates, policy and guidance unchanged

Audrey Hill
April 27, 2018

Claus Vistesen of Pantheon Macroeconomics said Draghi's statement about a focus on recent data "could be interpreted as a sign that the central bank is making the incoming [three months to June] data conditional on how it intends to proceed with QE".

Earlier Thursday, Sweden's central bank pushed back a plan to raise interest rates for the first time since 2011, warning that inflation in the largest Nordic economy remains too weak.

The ECB's interest rate on its main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at zero, 0.25 and -0.40 percent respectively.

European equities were up 0.4 percent ahead of Mario Draghi's 1230 GMT news conference and as MSCI's most widely-followed gauge of world stocks pulled out of its longest losing streak of the year so far.

The bank's quantitative easing (QE) programme, in which it now buys €30bn (£26bn) a month of eurozone bonds, is set to end in September this year.

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A dealer said the greenback hit multi-months high against a basket of currencies, bolstered by higher US Treasury yields, led by the 10-year benchmark breaching the three per cent threshold this week for the first time in four years.

The Eurosystem will reinvest the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time after the end of its net asset purchases, which will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance, European Central Bank stated. Europe's largest economy saw business sentiment drop to its lowest level in nearly a year in April, while sentiment in Italy and France also deteriorated.

A key worry is that protectionist rhetoric from the USA could push down the value of the dollar, an economic anomaly as the Federal Reserve is likely to raise interest rates several times this year, a natural support for the United States currency. This, in turn, could have ramifications for the ECB's sole policy objective of ensuring price growth returns to its near 2 percent target.

A stronger euro would cap inflation, but would affect growth and exports.

This happened as 10-year USA bond yields drifted back below the psychologically significant 3 percent mark and Wall Street futures pointed fractionally higher with another heavy dump of first quarter earnings coming up from companies such as Amazon, Microsoft and Intel.

Other reports by MaliBehiribAe

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