The ECB surprised everyone by announcing a new series of refinancing operations and delaying when it expects to raise interest rates.
European policy makers now say interest rates will remain at their present levels “at least through the end of 2019” versus “at least through the summer of 2019” at its previous statement.
The ECB announced new targeted longer-term refinancing operations on a quarterly basis, starting in September 2019 and ending in March 2021.
Headline comments from Dow-Jones:
Draghi: Weakening in Econ Data Points to Moderation in Growth Extending in 2019
Weaker Econ Momentum Slowing Inflation Adjustment to Aim
Significant Monetary Policy Stimulus Still Needed
ECB Stands Ready to Adjust All Instruments, If Needed
Recent Data Still Weak, Reflecting Soft Foreign Demand, Special Factors
Near-Term Growth Momentum Weaker Than Previously Expected
Activity Supported by Benign Financing Conditions, Rising Wage Growth
Eurozone 2019 GDP Seen +1.1% on Yr vs Earlier Estimate of +1.7%
Eurozone 2020 GDP Seen +1.6% on Yr vs Earlier Estimate of +1.7%
Eurozone 2021 GDP Seen +1.5% on Yr vs Earlier Estimate of +1.5%
Risks Surrounding Eurozone Growth Outlook Still Tilted to Downside
Substantial Downward Revision to 2019 Growth Estimate
Measures of Underlying Inflation Remain Generally Muted
Headline Inflation Likely to Decline Toward Year-End
Underlying Inflation Expected to Increase Over Medium Term
Eurozone 2019 HICP Seen +1.2% on Yr vs Earlier Estimate of +1.6%
Eurozone 2020 HICP Seen +1.5% on Yr vs Earlier Estimate of +1.7%
Eurozone 2021 HICP Seen +1.6% on Yr vs Earlier Estimate of +1.8%
New TLTROs Will Help Ensure Favorable Bank-Lending Conditions
In Coming Years “Congestion” of Bank Funding
Design of TLTROs Reflects Changed Econ Conditions
Moved Calendar-Based Part of Forward Guidance From Sep to Dec 2019
Financing Conditions Even Eased Since Last Meeting
All ECB Measures Data-Driven, Following Cuts in Staff Forecasts
ECB Committed to Act When, If Needed
Decision Was Taken Unanimously
“Positive Sign” That There is Unanimity
Uncertainty Partly Related to External Factors
Probability of Recession “Very Low” in ECB Assessment
Revisions to Inflation Path Show That it Will Take Longer to Reach Target
We Kept Econ Risk Assessment as Being “Tilted to the Downside”
Latest ECB Actions Increase Resilience of Eurozone Economy
We Didn’t Tighten Monetary Policy When We Stopped QE
Conditions Are “Very, Very” Accommodative
Several Members Presented Option of Changing Calendar Guidance to Mar 2020
Markets Have “Pretty Well Understood” ECB’s Reaction Function
Latest Decisions Enhanced Credibility of ECB’s Foreward Guidance
The EUR has extended its fall outright, dropping -0.45% to a three-week low of €1.1255, as ECB President Draghi announces cuts to growth and inflation forecasts.
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