ECB keeps interest rates unchanged
13 Dec 2018
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The European Central Bank (ECB) at its policy meeting today decided to keep the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00 per cent, 0.25 per cent and (-)0.40 per cent, respectively.
The governing council of the bank said it expected the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 per cent over the medium term.
ECB said the net purchases under its open market asset purchase programme (APP), a non-standard monetary policy measures, will end in December 2018.
The European Central Bank President Mario Draghi did a tight-rope walk by keeping already low rates unchanged while promising to steer the bank away from a soft money policy, on the face of an economy that may be slowing and a dreary inflation outlook.
At the same time, the governing council is enhancing its forward guidance on reinvestment. Accordingly, the council will continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
Announcing the decision after the council meeting, Draghi the council has relied on regular economic and monetary analyses to keep the key ECB interest rates unchanged. “We continue to expect them to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term,” he said..
ECB said while external demand remained soft, with also some country and sector-specific factors, the underlying strength of domestic demand continues to underpin the euro area expansion and gradually rising inflation.
At the same time, uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility remain prominent. Significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term, he noted.
.webp)
