ECB keeps monetary policy unchanged as widely expected. Main refinancing rate is kept at 0.00%. Marginal lending facility and deposit facility rates are held at 0.25% and -0.40% respectively.
Forward guidance is changed to reflect the possibility of lower interest rates. That is, interest rates are expected to “remain at their present or lower levels at least through the first half of 2020”.
Also ECB “stands ready to adjust all of it instruments” if “medium-term inflation outlook continues to fall short of its aim”
Full statement here.
Monetary Policy Decisions
At today’s meeting the Governing Council of the European Central Bank (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 or lower levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to its aim over the medium term.
The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme 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.
The Governing Council also underlined the need for a highly accommodative stance of monetary policy for a prolonged period of time, as inflation rates, both realised and projected, have been persistently below levels that are in line with its aim. Accordingly, if the medium-term inflation outlook continues to fall short of its aim, the Governing Council is determined to act, in line with its commitment to symmetry in the inflation aim. It therefore stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner.
In this context, the Governing Council has tasked the relevant Eurosystem Committees with examining options, including ways to reinforce its forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.
US-China trade negotiations to restart on Tuesday, expectations are low
US-China trade negotiations are set to resume in Shanghai on Tuesday but expectations are rather low. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will meet China’s team again for a two day meeting. Trump indicated on Friday that China may want to drag on till after 2020 election in the US. He told reported at that White House China would probably said “let’s wait and see if one of these people who gives the United States away, let’s see if one of them could get elected.”
White House economic adviser Larry Kudlow also said on Friday he “wouldn’t expect any grand deal” at this week’s meeting. Instead, the team would just try to “reset the stage”. Though, he added, “we strongly expect the Chinese to follow through (on) goodwill and just helping the trade balance with large-scale purchases of US agriculture products and services.”
Separately, China’s state media CCTV said on Sunday, citing the National Development and Reform Commission and Ministry of Commerce, that the country has already made enquiries to US suppliers for soybeans, cotton, pork, sorghum and other agricultural products since July 19. CCTV reported “as long as the American agricultural products are reasonably priced and of good quality, it is expected that there will be new purchase.” though, it also urged that US should “take concrete measures to implement its relevant commitments and create favorable conditions for bilateral economic and trade cooperation”.