The European Central Bank held its key interest rates steady on Thursday, as anticipated, with investors awaiting further details on the bank's bond purchase program from ECB chief Mario Draghi.
In a regular policy meeting held in Nicosia, Cyprus, the governing council decided to maintain the benchmark 'refi' refinancing rate at a record low of 0.05 percent. The deposit and marginal lending facilities' rates remained unchanged at -0.2 percent and +0.3 percent, respectively.
Quantitative Easing Program Details Expected ¶
Market watchers expected Draghi to provide insight into the decision during his post-meeting news conference. However, the primary focus for financial markets was on any details regarding the bank's new quantitative easing (QE) program, announced in January. Under this program, the ECB plans to purchase 60 billion euros ($68 billion) of private and public bonds monthly for at least 18 months to counter deflation in the euro area.
The ECB also intended to release updated growth and inflation forecasts for the 19 countries sharing the euro. According to ING DiBa economist Carsten Brzeski, 'If anything, the (ECB's) macroeconomic assessment should have improved,' given better-than-expected fourth-quarter GDP data and positive sentiment indicators signaling the impact of lower energy prices and a weaker euro on the eurozone economy.
However, the 2015 inflation projection was likely to be revised downward due to lower oil price assumptions. Analysts noted that the new forecasts would, for the first time, consider the potential effects of the QE program.
Greece a Key Concern ¶
Greece was another point of focus, with analysts anticipating discussion on the country's ongoing conflict with international creditors over its bailout program extension. Greek banks rely heavily on ECB financing but currently depend on emergency liquidity assistance (ELA), which is more expensive than standard central bank refinancing operations.
A Greek government source revealed that Prime Minister Alexis Tsipras had requested the Bank of Greece governor to contribute to restoring liquidity in the Greek economy 'through all available means.' UniCredit analyst Marco Valli suggested that the ECB might wait for a formal assessment of reform progress before reconsidering Greek government bonds as collateral for regular refinancing operations, potentially in April.
The recovered account cited reporting by Capital FM.
