‘There was a sentence that has been removed from my introductory statement that used to say ‘if warranted to achieve its objective, the Governing Council will act using all the instruments available within its mandate’. – Mario Draghi, ECB
As markets expected, the European Central Bank left its monetary policy unchanged at its meeting on Thursday, saying it would continue monitoring inflation. Regarding non-standard monetary policy measures, the Governing Council confirmed that the monthly asset purchases of 80 billion euros would be reduced to 60 billion euros starting from next month. Policymakers also voted to keep the main refinancing rate at 0% and the overnight deposit rate at -0.4%. The ECB said that its key interest rates would likely remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases. After two years of the ECB’s QE programme inflation accelerated well above the Bank’s initial goal, signaling that the monetary stimulus should be reduced. However, the ECB President Mario Draghi pointed out that the recent acceleration in prices was mainly driven by a rebound in energy prices. Draghi also highlighted that risks related to the upcoming European elections had the potential of slowing the economic recovery in the region. Nevertheless, the ECB raised its 2017 inflation projection to 1.7% from 1.3% in December, adding that the expected pick-up would probably be temporary. Meanwhile, GDP growth projections were revised up to 1.8% from 1.7% in December.
