The European Central Bank left its interest rates unchanged on Thursday and maintained the forward guidance on monetary stimulus. The main refinancing rate is currently at a record low zero per cent, the deposit rate at 0-0.40 per cent, and the marginal lending facility rate is 0.25 per cent.
The ECB expects the key interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, two per cent over the medium term.
The bank reiterated its guidance for its asset purchases, following its June announcement that it aims to halve the current €30 monthly bond purchases to €15 billion after September and to end them in December.
The ECB said it intends to reinvest the principal payments from maturing securities for an extended period of time after the end of the net asset purchases.
An end to asset purchases will also be “subject to incoming data”.
Bank of England deputy governor Ben Broadbent recently stated that the BoE will tread carefully and keep a close eye on the effect on inflation when the time comes start selling its £435 billion of quantitative easing (QE) assets. He signalled that interest rates will remain the central bank’s main policy tool, and its policymakers will keep in mind that the effect of QE and its reversal depends on market conditions and the BoE’s communication.
Last month, the BoE said it might start to sell government bonds it bought to provide QE stimulus once it raises its interest rate to about 1.5 per cent, compared with a previous two per cent threshold.
The BoE’s main interest rate currently stands at 0.5 per cent. He stressed the BoE would look closely at any disinflationary impact from reversing QE. It seems that the BoE intends to raise interest rates in a limited and gradual way.
China’s government plans to adopt both fiscal and financial measures to underpin domestic demand as worsening trade relations with its major trading partner, the US, limited growth from exports.
Report compiled by Bank of Valletta for general information purposes only.