ECB Statement

The European Central Bank cut deposit rates by 10 bps last month, bringing them down to -0.50%, while refinancing rates remained unchanged at 0.00%.

There were no expectations for another cut today, but there was a slight chance since markets are anticipating two rate cuts this year. Anyway, they didn’t change anything today. Below is the statement from the ECB:

• Prior decision
• Deposit facility rate -0.50%
• Main refinancing rate 0.00%
• Marginal lending facility 0.25%

At today’s meeting the Governing Council of the European Central Bank (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 0.00%, 0.25% and -0.50% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.

As decided at the last Governing Council meeting in September, net purchases will be restarted under the Governing Council’s asset purchase programme (APP) at a monthly pace of €20 billion as from 1 November. The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.

The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

Not much has changed in this statement, compared to last month’s statement. The ECB will start the QE programme buying €20 billion, which they already mentioned last month. Although, let’s see what Mario Draghi has to say when he starts his press conference shortly.