ECB Leaves Rates Unchanged As Expected, Rates Unchanged Through Summer 2019

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    Helmholtz Watson

    ECB interest rates on the main refinancing operations…


    Helmholtz Watson

    ECB Draghi opening statement:

    [color=red]”The risks surrounding the euro area growth outlook have moved to the downside on account of the persistence of uncertainties related to geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility.”
    Highlights from Draghi in his opening statement:

    Incoming data have continued to be weaker than expected
    Slowdown is due to fall in external demand as well as some country-specific reasons
    Growth is likely to be weaker in the short term
    Risks around the eurozone outlook have moved to the downside
    Governing Council stands ready to adjust all of its instruments
    Underlying inflation is expected to increase over the medium term, supported by our monetary policy measures, the ongoing economic expansion and rising wage growth
    Structural reforms need to be stepped up

    NB: First time balance of risks shift to the downside in a meeting that doesn’t include new forecasts.

    “The Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards our inflation objective in a sustained manner,” he said.

    Helmholtz Watson

    ECB Draghi Q&A at press conference

    Underlying inflation has been muted
    Confidence in the outlook is based on continued growth and strong employment
    There is a profit squeeze and it’s only a matter of time until it’s passed through
    We were unanimous in assessing the factors that caused the slowdown, namely the ‘increasing general uncertainty’
    Decision was unanimous about acknowledging weaker momentum
    If risks persists, momentum will be weak for longer
    Cites slowdown in China and waning US fiscal stimulus
    Likelihood of recession is very low
    The ECB has given itself more time to assess risks

    ECB has a full toolbox available
    If we do TLTROs, there should be a monetary policy reason
    We don’t want to be in the situation where lower rates aren’t transmitted
    Can’t exclude a more benign economic outcome
    When market places first rate hike in 2020…shows they have understood our reaction function,


    Bond rate changes after the ECB Meeting:

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