Published: Fri, April 27, 2018
Markets | By Josh Butler

European Central Bank keeps interest rates, guidance unchanged

European Central Bank keeps interest rates, guidance unchanged

"But we expect President Draghi to hint at the press conference that a gradual normalization is still to come".

European Central Bank policymakers meeting on Thursday were keen not to upset investor expectations for a gradual withdrawal of the ECB's monetary stimulus, despite some concerns about the state of the economy, three sources told Reuters. "The currency is clearly frustrated with the ECB's lack of clarity in signalling whether or not its bond buying scheme will end before the year is over", says Connor Campbell, an analyst with Spreadex.

The bank also confirmed that the net asset purchases, at the current monthly pace of euro 30 billion, will run until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

If growth shows signs of slowing that could be a reason to extend the bank's 30 billion euros ($36 billion) in bond purchases.

Interest rates will be on hold until well past the horizon of net asset purchases, which likely implies a hike in September 2019 at the earliest, the economist added.

Austrian Governor Ewald Nowotny called for a debate on what the European Central Bank will do after quantitative easing runs out in September, according to the people, who asked not to be identified because Governing Council sessions are confidential.

Ford cutting production of cars to just Mustang, Focus by 2020
As part of the move, Ford will be phasing out sales of traditional sedans and hatchbacks in the North American market. Ford says that it "maintains the highest transaction prices of any full-line automaker - $36,300 per vehicle".

But with the risk of a global trade war still looming, it may not decide until absolutely necessary, so retaining the flexibility to adjust policy.

A key worry is that protectionist rhetoric from the United States could push down the value of the dollar even as the Federal Reserve is likely to raise interest rates several times this year, to support the U.S. currency. This, in turn, could have ramifications for the ECB's sole policy objective of ensuring price growth returns to its near 2 percent target.

A stronger euro would cap inflation, but would affect growth and exports. But a slew of recent data suggests the eurozone area has lost some of its momentum.

Nonetheless, the euro's recent strength has had a relatively limited impact in recent weeks.

At the time of writing, EUR/USD had fallen to 1.2124 from a pre-meeting level of 1.2175 and the Pound-to-Euro exchange rate had risen to 1.1510 from 1.1480 prior to the meeting.

It was trading at $1.2175 at 1148 GMT on Thursday, having retraced most of a rally that started in January and took it at one stage as high as $1.2555.

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