- ECB President does not surprise markets at Jan. meeting
As broadly expected, no policy announcements were made at the January policy meeting and the monetary policy statement remained unchanged.
At last week's meeting, the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations, the interest rates on the marginal lending facility, and the deposit facility would remain unchanged at 0.00 percent, 0.25 percent and -0.40 percent, respectively.
The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.
Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the new monthly rate of €30 billion, are intended to 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.
However, the main topic was whether the ECB would make a change in the forward guidance (FG) or not as the ECB's monetary policy accounts signaled that it could be readjusted in early 2018.
Speaking after the rate decision, ECB President Mario Draghi delivered a dovish policy message, showing some concern over the recent euro appreciation and rising market expectations about future policy rate hikes.
Furthermore, based on current data, he saw very little chance of interest rates being raised this year.
The questions-answers part of the meeting mainly focused on FG, the end of quantitative easing, and on the strength of the euro.
Draghi stated that discussions on amendments to FG “have not started.'
He explained that the account of the December meeting could have been misinterpreted, suggesting that discussions on FG would start soon, but not that FG would be adjusted soon.
Despite Draghi’s comments, experts believe that an adjustment of FG is likely to be announced in April and that a first rate hike could come in December.