‘There was really no justification for the ECB to keep on holding on to that reference of the possibility of lower rates.’ — Vasileios Gkionakis, UniCredit SpA
As markets expected, the European Central Bank left its interest rates and monetary policy unchanged at its Thursday meeting; however, it signalled that further rate cuts were highly unlikely. Policymakers acknowledged that the 19-country currency bloc was performing strong economically but inflation remained growth remained subdued, forcing the Bank to keep rates and policy on hold. However, policymakers gave a balanced view on the Euro zone economy. Still, the ECB did not even consider an option of lowering its 2.3T euro asset purchases. Even though policymakers predicted solid economic growth, they revised down its inflation forecast for the current year to 1.5%, down from the originally predicted 1.7% rate. Moreover, according to the Bank’s forecasts, inflation is unlikely to rise above 1.6% in 2019. Meanwhile, the Euro zone economy is expected to grow 1.9% in 2017. Back in the Q1 of 2017, the region’s economy expanded 0.6% on a quarterly basis and 1.9% on a yearly basis. In September, policymakers will need to decide whether to extend the QE programme or not.
