ECB drops zero hints on exiting the quantitative easing program
In the recent policy meeting dated 27th April 2017, the European Central Bank left its ultra-easy policy stance in place. The key interest rates were kept unchanged at “0 percent” and the monthly asset purchases were to be done at €60 billion till the end of December’17 or beyond until the ECB achieves it’s 2 percent inflation target.
Given the recent robust release of economic datasets from the zone and the spectacular victory of Emmanuel Macron in the first round of French elections, markets were expecting bolder change in April’17 policy statement which didn’t go as per plan. Furthermore, no hints were given on when the ECB would start exiting its stimulus programs. The after-effects of the policy outcome dented the demand of the shared currency. Both EURUSD and EURINR spot plunged by 0.29 percent and 0.32 percent respectively in yesterday’s trading session.
At a press conference, Mario Draghi’s opening statement was quite dovish. He affirmed that the risks surrounding Euro-zone’s growth outlook was still tilted to the downside.
About the economic activities, the President seemed quite optimistic as the growth rate increased to 0.5 percent in the fourth quarter of 2016 from 0.4 percent. Moreover, past labour market reforms has benefitted employment gains which in turn has supported real disposable income and private consumption. The signs of a stronger global recovery and increasing global trade suggest that foreign demand should increasingly add to the overall resilience of the economic expansion in the Euro Area. On the contrary, all is not well with Euro Area’s inflation rate which will remain low and is expected to rise only gradually over the medium term with the help of ECB’s monetary policy measures. — Neal Bhai Reports