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ECB Take No Further Action This Month

James Boston
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ECB Take No Further Action This Month

The European Central Bank (ECB) has just completed it’s regular monthly policy meeting in Frankfurt with the following statement: “At today’s meeting the Governing Council of the ECB decided that 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 0.15%, 0.40% and -0.10% respectively”. So no further monetary loosening this month, this is not altogether surprising to markets that had not anticipated any direct interest rate change to emerge from today’s meeting.

The ECB are however not yet done for the day, the customary press conference to follow this afternoon will provide a forum not only for Mario Draghi to explain the Council’s current thought process but also to outline a much anticipated update to the quantitative easing timeline.

The disparate nature of the Eurozone recovery has to date made it difficult for the ECB to commit to definitive actions, which in many situations would aid the smaller recovering economies but by the same token increase the risks in the larger and better performing economies. Mario Draghi deftly steered the Eurozone through the first half of this year with his statement that the Bank would ‘do everything necessary’ to ensure the return of stable growth to the zone. This simple statement meant that a form of action may be pending however as no action had to be taken it resulted in a much needed guarantee to the weaker nations without the harmful effects of excess stimulus affecting the stronger ones.

Last month’s moderate loosening action very much had the same effect, it proved that the ECB is still in control but was not meaningful enough to directly alter the underlying economics of the zone. Today’s statement is likely to be in the very same mold, this time in the guise of a re-commitment to quantitative easing although without actually resulting in any immediate action.

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