ECB decides to keep its money taps open
frankfurt — The European Central Bank left its ultra-easy policy stance in place on Thursday as inflation continues to undershoot its target but explicitly acknowledged the vigour of the euro zone economy, now on its best run since the global financial crisis.
The ECB maintained its bias for further policy easing, leaving the door open to further rates cuts or an increase in asset buys. This is in line with market expectations but at odds with calls from Germany, the euro zone’s economic powerhouse, for a gradual reduction of stimulus.
“Incoming data since our meeting in March confirm that the cyclical recovery of the euro area economy is becoming increasingly solid and that downside risks have further dimin- ished,” ECB President Mario Draghi told a news conference.
“At the same time, underlying inflation pressures continue to remain subdued and have yet to show a convincing upwards trend,” he added, justifying the continued stimulus measures.
However, in response to a reporter’s question, Draghi noted there had been a debate among ECB council members over the euro zone growth outlook, with some “more sanguine” than others. That, he added, had resulted in a line being added to his introductory statement which noted that downside risks to the growth outlook “relate predominantly to global factors”.
The euro weakened slightly against the dollar following the rates decision after trading near six-month highs, aided by expectations that Macron would win the French presidential vote on May 7.
The subtle tweak in language will be seen by some observers as foreshadowing a more bold change at the next meeting in June, possibly including a removal of a phrase signalling a bias for more policy easing. Euro zone economic sentiment hit a 10-year high this month and political risk is receding after proeuro centrist Emmanuel Macron won the first round of France’s presidential vote.
Elsewhere, the Bank of Japan, also operating deep in unconventional territory, offered its most optimistic assessment of the economy in nine years on Thursday but signalled that it would maintain its massive stimulus effort. — Reuters