The European Central Bank has announced its June policies, which include leaving interest rates unchanged and hinting at further action if inflation fails to improve. President Mario Draghi said at a press conference that external shocks, such as a possible exit from the EU for Britain, would affect the market negatively and he recommends that the UK remain in the EU.
Mr. Draghi hinted that there is still the possibility for future stimulus if needed. This is following the ECB’s increase in its qualitative easing programme in March from €60 billion to €80 billion. The ECB will also start buying high-grade corporate bonds in early June.
The euro barely reacted to the news that interest rates will not be changed. Most recent forecasts now expect inflation to hit 0.1% this year, 1.3% in 2017 and 1.6% in 2018, possibly due to a rise in oil prices.
David Cheetham of XTB.com comments: “As was widely expected the ECB have announced that they will make no alterations to the three benchmarks interest rates or QE programme following the conclusion of their latest meeting. During the press conference shortly after the rate decision President Draghi struck dovish chords as the markets have grown accustomed to in recent times, stating the rates will stay at present or lower levels for some time. Market reaction so far has been fairly subdued with the slight upward revision to this year’s inflation forecast of 10 basis points arguably the biggest takeaway, but seemingly not a big enough development to cause a sustained market move.”
David Cheetham is a market analyst at XTB. For more information about him, please visit: https://www.xtb.com/en/market-analysis/our-analysts/david-cheetham