The euro sign sculpture stands near the former European Central Bank (Photographer: Krisztian Bocsi/Bloomberg)

ECB Keeps Policy Unchanged as Slower Growth Favors Caution

(Bloomberg) -- The European Central Bank maintained its pledge to move slowly in removing euro-area stimulus, setting the stage for President Mario Draghi to face questions over a recent spate of weaker-than-expected economic data.

Policy makers reiterated that they’ll continue buying 30 billion euros ($36 billion) of assets a month until at least the end of September, while linking the conclusion of quantitative easing to a sustained adjustment in inflation. They kept interest rates unchanged and repeated that they expect borrowing costs to stay at present levels until well past the end of net bond purchases.

ECB Keeps Policy Unchanged as Slower Growth Favors Caution

The Frankfurt-based institution also repeated that additional support will come from its policy of reinvesting maturing debt. Attention now turns to Draghi’s press conference at 2:30 p.m. in Frankfurt. The euro held steady after the decision, trading up 0.1 percent at $1.2178 at 1:47 p.m. Frankfurt time.

Read real-time analysis of the ECB meeting in our TOPLive blog here.

ECB Interest Rates
Deposit Rateminus 0.4 percent
Main Refinancing Ratezero
Marginal Lending Rate0.25 percent

The unchanged decision comes a few days after Draghi acknowledged at the International Monetary Fund meetings in Washington that while the euro area’s growth may have come off the boil, the economic expansion will continue.

“Notwithstanding the latest economic indicators, which suggest that the growth cycle may have peaked, the growth momentum is expected to continue.”
-- Draghi at the IMF, April 20

The key question facing the ECB president is whether the subdued momentum warrants further caution as policy makers prepare to potentially phase out bond buying later this year. Growth concerns come on top of risks emanating from global trade restrictions and a stronger euro, which threaten to undermine the region’s export-heavy economy.

What Our Economists Say


“We expect him to downplay the risks to the recovery while acknowledging that a slowdown to more sustainable rates of expansion was always on the cards. The risk, though, is one of a dovish surprise.”

--Jamie Murray and David Powell, Bloomberg Economics

For more, read our Euro-Area React

Inflation, meanwhile, remains well below the central bank’s goal, and was unexpectedly revised to 1.3 percent in March from an initial estimate of 1.4 percent. Several policy makers have expressed confidence nonetheless, with Executive Board member Yves Mersch arguing that the dip in price pressures has been less pronounced than expected.

More Time

ECB officials see scope to wait until their July meeting to announce details around ending their bond-buying program, people familiar with the matter have told Bloomberg, citing a need for time to judge if the economy is overcoming its first-quarter slowdown.

Economists surveyed by Bloomberg don’t expect policy makers to start making changes to stimulus until June at the earliest, with most respondents expecting an end-date for asset purchases in July or September.

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