ECB Keeps Rates Unchanged, Sees Current Policy Stance “Contributing To Favorable Liquidity Conditions”

As expected, there was little surprise in the ECB monetary policy decision, which kept all three key ECB rates unchanged, and which announced that rates will “remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.”

As it unveiled before, QE will run at €30BN per month from January 2018 until the end of September “or beyond, if necessary, and in case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.” The ECB also noted it can extend QE size or duration if needed.

The central bank repeated it will reinvest maturing debt for extended period after QE, and that the “reinvestment will continue for as long as necessary, will help deliver appropriate stance” and “will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.”

The market reaction to the statement which was completely in line with expectations, was modest, with the EURUSD hardly even moving on the news.   

Full statement below

Monetary policy decisions

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that from January 2018 it intends to continue to make net asset purchases under the asset purchase programme (APP), at a monthly pace of €30 billion, until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the APP in terms of size and/or duration. The Eurosystem will reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary. This will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.