The ECB surprised everyone by announcing a new series of refinancing operations and delaying when it expects to raise interest rates.
European policy makers now say interest rates will remain at their present levels “at least through the end of 2019” versus “at least through the summer of 2019” at its previous statement.
The ECB announced new targeted longer-term refinancing operations on a quarterly basis, starting in September 2019 and ending in March 2021.
Headline comments from Dow-Jones:
- Draghi: Weakening in Econ Data Points to Moderation in Growth Extending in 2019
- Weaker Econ Momentum Slowing Inflation Adjustment to Aim
- Significant Monetary Policy Stimulus Still Needed
- ECB Stands Ready to Adjust All Instruments, If Needed
- Recent Data Still Weak, Reflecting Soft Foreign Demand, Special Factors
- Near-Term Growth Momentum Weaker Than Previously Expected
- Activity Supported by Benign Financing Conditions, Rising Wage Growth
- Eurozone 2019 GDP Seen +1.1% on Yr vs Earlier Estimate of +1.7%
- Eurozone 2020 GDP Seen +1.6% on Yr vs Earlier Estimate of +1.7%
- Eurozone 2021 GDP Seen +1.5% on Yr vs Earlier Estimate of +1.5%
- Risks Surrounding Eurozone Growth Outlook Still Tilted to Downside
- Substantial Downward Revision to 2019 Growth Estimate
- Measures of Underlying Inflation Remain Generally Muted
- Headline Inflation Likely to Decline Toward Year-End
- Underlying Inflation Expected to Increase Over Medium Term
- Eurozone 2019 HICP Seen +1.2% on Yr vs Earlier Estimate of +1.6%
- Eurozone 2020 HICP Seen +1.5% on Yr vs Earlier Estimate of +1.7%
- Eurozone 2021 HICP Seen +1.6% on Yr vs Earlier Estimate of +1.8%
- New TLTROs Will Help Ensure Favorable Bank-Lending Conditions
- In Coming Years “Congestion” of Bank Funding
- Design of TLTROs Reflects Changed Econ Conditions
- Moved Calendar-Based Part of Forward Guidance From Sep to Dec 2019
- Financing Conditions Even Eased Since Last Meeting
- All ECB Measures Data-Driven, Following Cuts in Staff Forecasts
- ECB Committed to Act When, If Needed
- Decision Was Taken Unanimously
- “Positive Sign” That There is Unanimity
- Uncertainty Partly Related to External Factors
- Probability of Recession “Very Low” in ECB Assessment
- Revisions to Inflation Path Show That it Will Take Longer to Reach Target
- We Kept Econ Risk Assessment as Being “Tilted to the Downside”
- Latest ECB Actions Increase Resilience of Eurozone Economy
- We Didn’t Tighten Monetary Policy When We Stopped QE
- Conditions Are “Very, Very” Accommodative
- Several Members Presented Option of Changing Calendar Guidance to Mar 2020
- Markets Have “Pretty Well Understood” ECB’s Reaction Function
- Latest Decisions Enhanced Credibility of ECB’s Foreward Guidance
The EUR has extended its fall outright, dropping -0.45% to a three-week low of €1.1255, as ECB President Draghi announces cuts to growth and inflation forecasts.
