-Ian Kernohan, Royal London Asset Management
As markets expected, the European Central Bank (ECB) kept its key interest rates on hold on Thursday, but signaled that it is prepared to add more monetary stimulus later in the year. The main refinancing rate was left at 0%, whereas the ECB interest rates on the deposit facility and the marginal lending facility remained unchanged at -0.40% and 0.25%, respectively. The central bank slashed its deposit rate deeper into negative territory in March. In a news conference, Mr. Draghi said the Brexit vote had added to "headwinds" for the Euro zone economy, that include broader geopolitical uncertainty.
Mario Draghi, President of the European Central Bank, also confirmed that the monthly asset purchases of 80 billion euros may run beyond the current deadline of March 2017, if necessary. Furthermore, the central bank's President highlighted that the governing council may provide more stimulus at its next meeting in September, as new post-Brexit forecasts for economic growth and inflation will be available by that time. Meanwhile, analysts polled by Reuters slashed their growth forecast for the Euro zone to 1.3% from 1.6%, but left inflation projections unchanged at 1.3%.
© Dukascopy Bank SA