Eurozone Monetary Policy April 2019


Eurozone: ECB keeps monetary policy unchanged in April

April 10, 2019

The European Central Bank (ECB) made no changes to its monetary policy in April, leaving interest rates at record-low levels against the backdrop of a sharp cool-off in growth. The refinancing rate sits at 0.00%, the marginal lending rate at 0.25% and deposit facility rate at minus 0.40%. In addition, the ECB left its forward guidance unchanged, after having pushed back the timing of a rate hike and significantly lowering their growth forecasts for the currency bloc at its last meeting. The ECB refrained from providing any details on the new series of longer-term refinancing operations (TLTRO-III) it had announced last meeting.

Soft incoming data regarding the Eurozone’s economy and moderate inflation has prompted the ECB to take a dovish stance in recent meetings. Growth slowed notably in the second half of 2018, and data for 2019 has been weak. This suggests that the economy is suffering from a slowing global economy, heightened uncertainty and problems in the industrial sector. In the accompanying press conference, ECB President Mario Draghi largely reiterated the previous statement’s message and emphasized that “the risks surrounding the euro area growth outlook remain tilted to the downside, on account of the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets.”

Looking ahead, the ECB kept its dovish tone and pointed to the continuation of accommodative monetary conditions. The Bank reiterated that interest rates are expected to “remain at their present levels at least through the end of 2019” and that it would continue to reinvest the principal payments from maturing securities “for an extended period time”.

All of our panelists project the refinancing rate to remain at 0.00% this year. In 2020, the bulk of our panel sees the ECB gradually tightening rates, with Consensus projecting the refinancing rate to end the year at 0.21%.

Author: Angela Bouzanis, Lead Economist

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