ECB Raises Eurozone Growth Forecasts, Trims Inflation Outlook

Asset purchases under the program are due to continue at least until December at a pace of €60-billion per month.

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.

In a press conference following the decision, European Central Bank president Mario Draghi dropped a long-standing reference to "downside risks" to the euro zone's economic outlook from his policy message, saying instead that risks are now "broadly balanced".

Indeed, the European Central Bank bumped its projections for euro area GDP growth in 2017, 2018 and 2019 by one tenth of a percentage point in comparison to the projections it made in March, to 1.9%, 1.8% and 1.7%, respectively.

China's gold reserves were unchanged at 59.24 million ounces in May, the country's central bank had said on Wednesday.

This undermined market hopes that policymakers could adopt a more optimistic view on monetary policy as a result of positive first quarter Eurozone growth data.

"This is a small, but significant, change in the bias of interest rates setting", Pantheon Macroeconomics' Chief Eurozone Economist Claus Vistesen writes in an emailed note. The economy is now expected to grow 1.9 percent this year and decelerate slight in 2018 and 2019.

That is now predicted to average 1.5% this year, before falling to 1.3% in 2018 and 1.6% in 2019. Analysts expect it to say that risks to the recovery are "balanced", instead of skewed to the downside.

Investors remain on tenterhooks ahead of Comey's evidence to a congressional committee, which could be damaging to US President Donald Trump and his economy-boosting agenda.

Meanwhile, inflation in the currency area sank to 1.4 per cent, which is below the bank's target, although Mr Draghi said "deflation risks have definitely gone away".

The purchases push that new money into the economy, a step that can increase inflation.

Inflation dynamics are "still dependent on the extension of our current monetary policy", European Central Bank boss Mario Draghi emphasized recently, to help justify his bond purchase program, which will run until the end of 2017 at least.

Europe's broad FTSEurofirst 300 index closed down 0.04 percent at 1,528.71.

The downgrade mainly reflected lower oil prices, Draghi said.

The bank's adjusted statement represents a cautious step toward an announcement, expected later this year, that the bank will taper and end its extraordinary monetary stimulus as growth and inflation improve.

"They have omitted the guidance that interest rates might be cut, but they have kept all their other easing measures in place and the comment that quantitative easing could be extended if needed", Sonja Marten, senior FX strategist at DZ Bank in Frankfurt, said.

  • Zachary Reyes