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ECB left interest rates unchanged

Thursday, Dec 14 2017
ECB left interest rates unchanged

ECB left it monetary policy and its forward guidance unchanged from its last meeting. Then it announced that its asset purchases would be halved starting in January to 30 bln euros a month through September 2018.  The ECB reiterated that official rates will be remain at their present level well past the end of the net asset purchases.  It indicated that QE would continue until the end of September, but will "run until the inflation path is sustainably adjusted.  The ECB sees domestic generated price pressures as continuing to be "muted." This means ta sustained uptrend in price trend remains elusive.

The ECB's staff forecast raised growth forecasts "substantially" and made minor adjustments to its inflation projections. Turning to growth first, the staff raised this year's GDP forecast to 2.4% from 2.2%, and next year's growth was raised to 2.3% from 1.8%. The GDP forecast for 2019 was raised to 1.9% from 1.7%, and for the first time, introduced a 2020 GDP forecast of 1.7%. The forecast suggests growth momentum is peaking or will peak shortly. The minor adjustments mean that this year's inflation forecast was unchanged at 1.5%, while raising next year's projection to 1.4% from 1.2%.  The 2019 forecast was left unchanged at 1.5% and the 2020 forecast, introduced for the first time at 1.7%. 

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