European Central Bank Accentuates the Cup Being Half Full

October 25, 2018

Today’s ECB Governing Council meeting was not one associated with updated macroeconomic forecasts, but the President Draghi’s introductory statement and press conference expressed confidence in a coming convergence of currently muted inflation on the target of less than but close to 2%. The Council expects continuing positive broadly based economic growth despite some recent weakening in its pace and several uncertainties such a trade tensions, Italy’s fiscal situation, Brexit, vulnerable emerging markets, and financial market volatility. The labor market has tightened, monetary policy is remaining stimulative, and quickening wage increases will probably keep the economic expansion intact.

The Governing Council reaffirmed the current policy stance. Central bank interest rates — a zero refinancing rate flanked by a -0.40% deposit rate and a +0.25% refinancing rate — will be maintained at least through the summer of 2019 and longer if necessary. Asset purchases of EUR 15 billion per month will end after December, but maturing principal of securities bought previously under the plan will be reinvested “for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation.” The next and final ECB Governing Council monetary policy review of 2018 will be on December 13.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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