The European Central Bank has kept interest rates on hold and reaffirmed plans to wind up its bond-buying programme in December.
At the ECB’s monthly meeting in Frankfurt on Thursday, ECB President Mario Draghi reiterated that the bank expected to keep rates on hold at record low levels until at least the summer of 2019.
The eurozone base interest rate will remain at 0.00%, with the marginal lending rate and deposit rate remaining at 0.25% and minus 0.40% respectively.
Timothy Graf, head of macro strategy for EMEA at State Street Global Markets said: “Having offered significant and far-reaching policy guidance at its last meeting, the ECB had no need to rile languid summer markets.”
Graf added that while the Q1 fall in growth in the eurozone was probably temporary, inflation remained a distance from its 2% target and the outlook for the eurozone was somewhat clouded by the prospect of rising trade barriers.
“In that context, the caution shown around policy normalisation looks more than justified. Rate and FX markets will struggle to take much direction from what was a widely expected outcome.”
Goldman Sachs Asset Management chief executive Andrew Wilson said: “The meeting yielded little new information with regards to the policy outlook following last month’s forward guidance update.
“We continue to expect a first rate increase in late-2019, though the balance of risks are skewed toward a later move.
Wilson added: “Beyond this, we expect one further rate hike to return the policy rate to 0% but see little action thereafter given our subdued inflation outlook. Diminished risk of deflation warrants some policy normalisation but “low-flation” will, in our view, require prolonged monetary accommodation. Of course, that will be for Mario Draghi’s successor to decide from November next year.”
