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No Changes in the ECB’s Stimulus After Policy Meeting

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The European Central Bank (ECB) stimulus of $1.9 trillion has been left unchanged following the policy meeting that was held on Thursday. The president of the ECB, Mario Draghi reports that his main concern aren’t the current policy measures of the ECB, but rather that the Eurozone’s inflation continues to fall under the ECB’s 2% target. According to the newest ECB predictions, inflation will rise gradually during the next few years, reaching a 1.6% value in 2018. Moreover, Draghi has praised the current policies of the ECB, stating that these policies have led to negative interest rates. Furthermore, the same policies account for more than $90 billion per month in bond purchases.

In response to the policy meeting report, the Euro Stoxx 50 index fell approximately 2%. However, it rebounded shortly after. Furthermore, the euro gained 0.5% over the USD. However, it was a short term gain, having since fallen back close to the previous parity. Given the current, low inflation from the Eurozone, the majority of investors are expecting the ECB to supplement its bond-purchasing program. According to Draghi, even though the Eurozone is experiencing an expanding economy, the growth rate is minimal. Further, he blames these statistics on external factors, including the leave vote held in June in the United Kingdom.

However, despite the results of the policy meeting, Draghi continues to underline that the bank will act towards increasing its stimulus if the need arises. Moreover, he added that the bank is reevaluating its QE program. The resulting QE extension could broaden the range of assets that are eligible for QE. According to the ECB’s current QE program, the bank can’t purchase more than 33% of the bond issues.

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