- ECB will keep the interest rates at their present levels at least through the end of 2019
- Forecasts for inflation and for GDP were cut
- The risk surrounding the euro area growth outlook have moved to the downside
- The policymakers announced a new series of quarterly targeted longer-term refinancing operations (TLTRO-III)
- The probability of a recession in the EU is still low
The European Central Bank announced this Thursday that it will keep the interest rates at their present levels at least through the end of 2019. Some members wanted a longer pushback to March 2020 but this was not accepted. The ECB downgraded its 2019 growth forecasts and the risk surrounding the euro area growth outlook have moved to the downside. The probability of a recession in the EU is still low but developments in the union are far from encouraging. It is also important to mention that the policymakers announced a new series of quarterly targeted longer-term refinancing operations (TLTRO-III), which will be launched in September 2019 through March 2021. This will provide additional cheap money to banks but according to some analysts this decision was a “panic move.”
The ECB´s President Mario Draghi said at this monetary meeting that the economic growth in the EU is decelerating and the inflation is still below expectation. Draghi added that the measures taken are meant to support inflation and that he believes that this will have a positive influence on economic growth. The European indexes are under the pressure as political uncertainty and soft financial data keep denting the market’s mood. The ECB´s President Mario Draghi also said that slowing global demand (China) is also weighing on the economic growth in EU. The Chinese economy is heading for a rough start to 2019 and the economy is continuing to slow further. On the other side, concerns about Brexit and trade talks between the US and China are also one of the main market movers. Trade talks between the US and China will continue but the policymakers from both countries agreed that significant progress has been made. This is positive for all other major economies because the trade war would likely downgrade earnings of a lot of companies all over the world. In the meantime, optimism about Brexit fades on politicians comments, as the Labour Party is not willing to support May’s deal. There is no solution yet to the Irish border issue and Theresa May said that a no-deal Brexit would be a serious threat to the economy in Eurozone.