ECB leaves interest rates unchanged and QE at €80bn

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ECB monetary policy announcement from the April 2016 meeting 21 April 2016

  • Main refi rate 0.0%
  • Deposit rate -0.40%
  • Marginal lending rate -0.25%
  • Total monthly QE €80bn
 

Draghi opening statement: We see rates at present or lower levels for extended time

  • Repeats that purchases will run until at least March 2017
  • Repeats that purchases will continue until sustained inflation
  • Broad financing conditions have improved
  • Global uncertainties persist
  • Will monitor developments very closely
  • It's crucial to avoid second round effects
  • Will use all instruments if needed

    • Economic assessment:

  • Q1 growth likely broadly similar to Q4 2015
  • Expects recovery to proceed
  • Cites softer exports
  • Eurozone risks still tilted to the downside
  • Outlook dampened by slow structural reforms
  • Repeats inflation could turn negative soon
  • Repeats that inflation will pick up later this year
 

EURUSD collapses after Draghi bore off Everything's all arse about face today Ok, here's how it works

  1. The market said if it doesn't get anything dovish we're going to buy it
  2. The market didn't get anything dovish so bought it
  3. The market couldn't get it higher than 1.1400 and with nothing more coming, saw no reason to keep buying it
  4. If no one's buying it then there's only people selling it
  5. If the buyers have had enough, they start selling too
  6. EURUSD trades from near 1.1390 to 1.1276 as the balance tips

Forget what the ECB are doing or what messages Draghi should or shouldn't have given. This was a complete non-event that people felt the need to trade and that's what's pushing the price around.

 

Draghi defends ECB as Merkel enters low-rates debate The head of the ECB robustly defended its cheap money policy on Thursday against sharp criticism from Germany, as the country's leader entered a debate that has driven a wedge between the euro zone's central bank and its biggest economy.

Mario Draghi said the ECB's policy of printing money and keeping borrowing costs at rock bottom was working, adding that interest rates would stay at current record lows for a long time.

Emphasizing the bank's right to independence from political interference, Draghi also called on euro zone governments to help get the region's sluggish economy on a more solid footing through economic reforms.

Speaking to reporters after the bank's governing council held key rates, he said harsh criticism in Germany undermined the ECB and its attempts to buoy the economy, playing down complaints that low rates were squeezing savers.

"We obey the law, not politicians," Draghi said, underscoring his commitment to the ECB's primary task of keeping inflation ticking steadily up.

Criticism by politicians in Germany has escalated amid fears that the ECB could even start to hand out free or 'helicopter money' to citizens.

No sooner had Draghi spoken, German chancellor Angela Merkel took the unusual step of describing the debate about the ECB's low interest rates as legitimate.

"That there are people in Germany who discuss the fact that interest rates have been much higher is legitimate," she said, in an acknowledgement that savers' concerns were genuine.

Speaking earlier, Draghi had sought to calm German fears, throwing cold water on helicopter money or similar ideas.

But he argued that there was little alternative to the ECB's course of money printing and low interest rates in a world where economic prospects were dim.

"Criticisms of a certain type could be viewed ... as endangering the independence of the ECB," he said, adding that this would delay investment.

"The result... is that it will take longer ... to produce the results that we want," he said, arguing that this would only result in further ECB action.

Draghi's remarks were in response to increasingly bitter criticism in Germany, where savers, banks and fund managers have been vocal about the impact of low rates.

Finance Minister Wolfgang Schaeuble recently even argued that ECB policy was partly to blame for the rise of the right-wing anti-immigration Alternative for Germany (AfD).

Draghi answered personal criticism in Germany, where many associate his home country of Italy with economic mismanagement and where conservative politicians recently called for his successor to be a German.

While acknowledging the complaints of savers and banks about the impact of low interest rates, he said there was little alternative.

"Would a non-Italian president run different policies?" he said. "Our policies are the same policies that are being enacted in other parts of the world," he said, referring to low-interest-rate policies globally, saying that the ECB's governors from around the 19-country bloc stood behind him.

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