Eurozone Monetary Policy May 2018


Eurozone: ECB holds rates steady in uneventful meeting

April 26, 2018

The European Central Bank (ECB) did not deliver any surprises at its 26 April monetary policy meeting, leaving its ultra-accommodative monetary policy stance unchanged and refraining from offering any clues on the future of its bond-buying program after September. The main refinancing rate remains at 0.00%, and the marginal lending rate and deposit facility rate at 0.25% and minus 0.40%, respectively. The ECB reiterated that the asset purchases program will continue at a pace of EUR 30 billion per month until September or beyond, if necessary.

ECB President Mario Draghi’s accompanying statement was virtually unchanged from the previous meeting, with Draghi stressing that underlying inflation remains subdued and that an ample degree of monetary stimulus is necessary, warranting the Bank’s accommodative stance. Inflation in the Eurozone remains low despite solid growth last year and ultra-low interest rates, partly being dampened by a strong euro. Regarding growth, Draghi acknowledged that recent economic data for the common-currency bloc has been weaker than expected, but downplayed concerns, stating that underlying dynamics are solid and broad-based.

Draghi also offered no change to the Bank’s forward guidance, stating that interest rates will remain at their current levels “for an extended period of time, and well past the horizon of our net asset purchases”. In addition, the guidance on the future of the Bank’s asset purchases was unchanged, and the program could be extended depending on the evolution of inflationary pressures and economic data. Commenting on the future of the program, Carsten Brzeski, Chief Economist for Germany and Austria at ING added:

“In our view, the next meeting in June, which will be held in Riga, should bring some guidance for the future path of QE. […] Anything but another extension beyond September would be a big surprise. The two main questions for any roadmap should be whether it will be an extension for three or six months and whether there will be an end-date to the extension or not.“

Eurozone Interest Rate Forecast

Almost all our analysts expect that the refinancing rate will remain unchanged for the rest of this year; however, divergent views exist, and the Consensus is for the rate to end the year at 0.01%. For 2019, our panelists see the policy rate ending the year at 0.35%.


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Eurozone Monetary Policy Chart

Euro Monetary Policy April 2018

Note: ECB Refinancing Rate in %.
Source: European Central Bank (ECB).

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