The European Central Bank (ECB) left its benchmark interest rate unchanged Thursday and gave no clarity on the anticipated wind-down of its stimulus program.
The central bank held interest rates at 0.0 percent and kept the door open for even more stimulus, saying that it stands poised to increase its asset purchase program if needed.
“The Governing Council confirms that the net asset purchases, at the current monthly pace of 60 billion euros, are intended to run until the end of December 2017, or beyond, if necessary,” the ECB said in the statement.
The euro fell slightly on the news to trade at $1.1967 against the dollar before tracking back up to $1.1975. It was trading at $1.1982 shortly before the announcement and is still close to its high for the session.
President Mario Draghi had said at the last ECB press conference in July that discussions over the future of the central bank’s quantitative easing (QE) program could be expected in “the fall” – prompting many to speculate that he could detail a reduction in September.
However, a rising euro prompted analysts to suspect that an October announcement could be more likely. Investors will now be looking to a press conference with Draghi at 1:30 p.m. London time to gain more clarity on the ECB’s plans.
The euro has appreciated by around 2.4 percent against the greenback since the last meeting of the bank and concerns are growing that the strong euro might dampen the region’s recovery and weaken inflation prospects. Since the start of the year, the euro has risen 13 percent, buoyed in part by a weakening dollar.
The higher the euro, the more expensive products and services get for non-euro customers, which might affect exports from the currency union. At the same time it dampens inflation as imported goods get cheaper. Some see Draghi’s ambiguity as being an intentional effort to quell investors and end the euro’s rally.
The central bank is targeting an inflation rate of close to but below 2 percent.
– CNBC’s Annette Weisbach contributed to this report.
Source: cnbc
Dovish ECB leaves room for even more stimulus