European Central Bank meeting: Quantitative easing is coming to an end but low rates likely to persistContributors Jai Malhi, Global Markets Insights Strategy Team
Today the European Central Bank (ECB), at its final monetary policy meeting of the year, confirmed that it will cease net asset purchases at the end of this year, in line with its previous guidance. The ECB kept its key interest rates unchanged and also kept the forward guidance on its deposit rate the same. They also produced new macro-economic projections that include forecasts for 2021.
President Mario Draghi had previously stated that the central bank’s key interest rates would stay at their present levels “at least through the summer of 2019”. There was no change to this forward guidance on rates but he did acknowledge some of the risks to growth. These downside risks could postpone the move away from negative rates. While we are seeing the end of new net purchases, the ECB will reinvest its maturing bonds for an extended period of time beyond the date when it starts to raise interest rates.
EXHIBIT 1: European Central Bank staff macroeconomic projections for the euro area
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