ECB to keep taps open as economic outlook uncertain
- Author: Zachary Reyes Jun 15, 2017,
Jun 15, 2017, 15:00
"Nothing substantial has happened to inflation except the price of oil and the price of food. underlying inflation has remained the same year to year", he noted. Analysts think the bank might announce that in September.
Sterling hit a two-week high of $1.2936 earlier in the session after polling organisations' last surveys, but weakened later in the day to trade down 0.18 percent at $1.2936.
Ending the bond purchases and raising interest rates could have wide-ranging effects, such as a stronger euro and higher interest costs for heavily indebted governments. Projections for core inflation were also lowered and is expected to pick up to just 1.7% by 2019, which is still not quite near enough to the ECB's target of close but below 2%.
The ECB has predicted a growth across the eurozone of 1.9% - up from the predicted 1.8% which was forecast in March.
Indeed, the ECB chief took pains to emphasize the central bank's unchanged bias toward an open-ended quantitative-easing commitment and the downward revisions to the inflation forecast.
The European Central Bank made a small step toward phasing out its extraordinary support for the economy on Thursday - but left its stimulus programs and record low interest rates unchanged despite a spreading recovery in the 19 countries that use the euro currency.
Aberdeen Asset Management Senior Investment Manager Patrick O'Donnell said:"The ECB is essentially in a holding pattern, waiting for more positive inflation data to come in".
The pound has dropped quickly into $1.27's against the U.S. dollar and €1.13's against the Euro already.
The meeting of the ECB's governing council was dedicated above all to slight corrections to their communication, explaining that the risks for growth are now "broadly balanced" and no longer tilted to the downside. Lena Komileva, economist at G-plus Economics, argued that investors may be putting too much emphasis on what was a "dovish performance" by Draghi.
The euro, which weakened on Wednesday on reports that the European Central Bank would cut its inflation forecasts, was down 0.4 percent to $1.121, after dipping to $1.1196, its lowest since May 31.
But while it has raised its growth predictions, the European Central Bank has made a more notable change to its forecasts for eurozone inflation. They expect it to start tapering the size of the monthly purchases in early 2018 until they are ended in mid-year or later. It's being held in Tallinn, Estonia, one of the occasional meetings held away from the bank's Frankfurt headquarters. That is a particular problem for Germany, which is Europe's savers nation, who are now having to accept negative interest rates, while Finance Minister Wolfgang Schäuble is vehemently opposing expansionary policy.