March 6, 2014 in Forex Fundamentals and News
At its meeting today in Frankfurt, the Governing Council of the ECB maintained the status quo on interest rates, on the basis of better economic data out of the euro area.
Better-than-expected recent data on GDP, rising levels of business confidence and expansions in manufacturing and services in an environment of persistently low inflation probably nudged the ECB towards their decision to keep interest rate policy intact and unchanged. The ECB said:
“At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.25%, 0.75% and 0.00% respectively.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today.”
The ECB’s decision was widely expected by analysts across the globe.
However, according to the IMF, the ECB is hastening too slowly, and advocated yesterday that it should take stronger measures to breathe life into the Eurozone economy by cutting interest rates and adopt QE-style strategies.
In a blog, Reza Moghadam, the head of the IMF’s European Department said:
“The ECB must be sure that policies are equal to the tasks of reversing the downward drift in inflation and forestalling the risk of a slide into deflation. It should thus consider further cuts in the policy rate and, more importantly, look for ways to substantially increase its balance sheet, be it through targeted LTROs or quantitative easing (public and private asset purchases).”
The ECB in its wisdom has held its fire.
We look forward to Draghi’s press conference later today.
Meanwhile, the EURUSD exhibited some volatility after the decision but was mostly unchanged, thereafter: