- James Athey, Aberdeen Asset Management
As markets expected, the European Central Bank left its monetary policy unchanged at its meeting on Thursday as inflation remained below its 2% target. Although, the ECB acknowledged strong economic growth, with the economy showing the best growth rate since the global financial crisis. Nevertheless, the Central bank said that further rate cuts and an increase in asset purchases remained on the table despite Germany's calls for a stimulus reduction. The ECB President Mario Draghi stated that last month's data confirmed the view that the economy was in a good shape and downside risks continued to fall over the past several months. However, Draghi noted that underlying inflation growth remained subdued, driven by temporary factors, such as the change in crude oil prices. Therefore, policymakers voted to keep the Bank's main refinancing rate at 0.00%, the deposit rate at -0.4% and the pace of monthly asset purchases at 60B euros. Nevertheless, some analysts assumed that if Emmanuel Macron wins the final round of the French Presidential Election and the Euro zone's economy maintains a moderate yet stable pace of growth the ECB would likely reduce some of its stimulus at its next meeting in June. Furthermore, Draghi highlighted that deflation risks the risks of deflation "largely disappeared''.
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