European Central Bank keeps rates, policy and guidance unchanged

by Fredrick Graves April 27, 2018, 5:16
European Central Bank keeps rates, policy and guidance unchanged

With eurozone growth still strong by historical standards, most economists expect the European Central Bank to phase out its bond purchases by December - four years after the Federal Reserve halted its own QE program - and to start raising interest rates late next year.

At a press conference, ECB President Mario Draghi admitted some moderation of the Eurozone economy.

With the euro falling, the dollar traded near a 3-1/2-month high against a basket of currencies, bolstered by the 10-year Treasury benchmark yield breaching the three percent threshold for the first time in four years.

Asia also rose overnight as record quarterly profits from Samsung helped offset nerves in China after reports that USA prosecutors have been investigating whether Chinese tech giant Huawei violated Iran sanctions.

"The worry is about an overheating, leading to a rise in inflation, higher interest rates which bring on a textbook recession".

The U.S. Dow Jones bluechip index had snapped a five-day losing streak on Wednesday, thanks to strong corporate earnings.

Deutsche Bank was up about half a percent, giving up some early gains.

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The reaction from its new chief executive, Christian Sewing, was to order cut backs in bond and equities trading in its long-troubled investment bank.

The ECB governing council at its meeting today decided that the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00 per cent, 0.25 per cent and (-) 0.40 per cent respectively.

He also said the ECB's support to the economy was still needed and the central bank would reinvest bonds.

The ECB's decision to stand pat had been expected, but Mr. Draghi's caution suggests the ECB could yet delay a decision to phase out its EUR30 billion ($36.6 billion)-a-month bond-buying program, known as quantitative easing or QE, which is now due to run at least through September.

"The risk is that he is less dovish than expected", Green added. The crown fell 0.2 per cent to 10.43 crowns versus the euro, and it was also down 0.2 per cent against the dollar. It fetched $1.21775 before the European Central Bank meeting.

The breather for the dollar helped emerging market currencies regain some ground having been nearly universally whacked by the combined yield and dollar rise over the last week.

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