ECB keeps rates unchanged with its massive stimulus program set to end this year

  • The ECB’s interest rate on its main refinancing operations, its marginal lending facility and the deposit facility will remain unchanged at zero, 0.25 and -0.40 percent, respectively.
  • Market players will be waiting to hear from ECB President Mario Draghi at 1:30 p.m. London time Thursday.

The European Central Bank (ECB) decided to keep its key interest rates unchanged Thursday, with policymakers showing little appetite for change after a flurry of activity at their last meeting.

The ECB’s interest rate on its main refinancing operations, its marginal lending facility and the deposit facility will remain unchanged at zero, 0.25 and -0.40 percent, respectively.

In June, the central bank outlined plans to end its massive bond-buying program in December and hinted that interest rates are likely to remain at current ultra-low levels until, at least, the summer of 2019. European policymakers repeated Thursday that this is their baseline scenario, which will only be subject to potential changes depending on upcoming data.

Market players will be waiting to hear from ECB President Mario Draghi at 1:30 p.m. London time Thursday, looking for any concerns the central bank currently has for the global economy.

Traders were also looking for clues on how the bank will reinvest cash from its current bond-buying program, with the ECB stating Thursday that these will take place over a long period of time and begin only after the asset purchase comes to an end.

    “The Governing Council intends to reinvest the principal payments from maturing securities purchased under the APP (asset purchase program) for an extended period of time after the end of the net asset purchases, and in any case for as long as necessary,” the ECB said in a statement.

    Analysts at research provider TS Lombard said the ECB will “deliberately talk down the prospect of rate hikes until QE (quantitative easing) is well out of the way.”

    “And looking that far out (mid 2019), Europe’s main central bank becomes hostage to wider global developments well beyond its control,” analysts said in a note Thursday, citing higher rates in the United States and trade wars as two potential examples.

    “The ECB might get round to raising rates in 2019, but only if this global cycle keeps defying the gloomy consensus,” they added.

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