ECB president says risks to economy diminished
- Author: Zachary Reyes Jun 08, 2017,
Jun 08, 2017, 22:30
Asian shares wobbled on Thursday as investors braced for any surprises from the United Kingdom elections, the European Central Bank's (ECB) policy meeting and congressional testimony from former Federal Bureau of Investigation director James Comey who was sacked by President Donald Trump last month.
On Thursday, the bank has kept its short-term benchmark rate that steers short-term rates at a record low of zero.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.27 percent while Japan's Nikkei .N225 rose 0.3 percent thanks to the dollar's rebound against the yen.
Meanwhile, the European Central Bank is unlikely to alter its commitment to buying 60 billion euros a month of government and corporate bonds until "at least" December 2017, they said. The size was reduced in March from Euro 80 billion.
However, in another baby step towards eventually starting the process of withdrawing monetary stimulus, the European Central Bank adjusted its announcement statement by removing the rate-cut bias from the sentence "interest rates to remain at present or lower levels". That language was altered to remove a previous reference to rates remaining at present "or lower levels for an extended period of time". While few expect that to happen, the words underline that the bank is not yet willing to call time on the stimulus program.
Policymakers meeting in Estonian capital Tallinn made a decision to keep the bank's main refinancing rate at 0.0 percent, the marginal lending rate at 0.25 percent, and the deposit rate at -0.4 percent - meaning lenders have to pay to park cash with the central bank - a spokesman said.
People needed to be patient and confident that stronger growth would feed into higher productivity and wages, he said.
European stocks inched higher and the euro and the pound barely budged, as markets readied for a triple-dose of excitement - an ECB meeting, a British election and testimony by Mr. Comey.
"I didn't hear any dissenting voice. with respect to the proposals", he said. Draghi's comments undermine the confidence in that belief.
"We need to be persistent, we need to accompany the recovery with our monetary policy". "If you downgrade your inflation forecasts the next year you're basically sending a message to the market - "We're not in any rush", CMC Markets' chief markets analyst, Michael Hewson, said.
A pivotal day for capital markets on Thursday comes as renowned bond investor Bill Gross said levels of risk in markets are at the highest since before the 2008 financial crisis.
Economic growth this year was seen at 1.9 per cent versus an earlier 1.8 per cent forecast.
"We are confident inflation will converge to our objective in a durable way", Draghi told reporters.
However, ANZ Bank New Zealand senior economist Sharon Zollner said the message from the ECB may be that policy remains accommodative "for a while yet" with an expectation "that inflation forecast will be cut despite a small lift in growth forecasts". The pound was steady Thursday as traders awaited the outcome it was down 0.3 percent at $1.2929.