Last updated: 09:00 / Thursday, 25 July 2019
ECB supports Lagarde

Draghi: “An Ample Degree of Monetary Accommodation is Still Necessary”

Draghi: “An Ample Degree of Monetary Accommodation is Still Necessary”
  • Rates stayed the same
  • ECB signaled to more rate cuts
  • The Governing Council has no objection to Christine Lagarde's appointment

At today’s meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.

According to a press release, "the Governing Council expects the key ECB interest rates to remain at their present or lower levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to its aim over the medium term".

However, on his opening statement, Draghi made it clear that loose policy is here to stay: “An ample degree of monetary accommodation is still necessary”.

The Governing Council also underlined "the need for a highly accommodative stance of monetary policy for a prolonged period of time, as inflation rates, both realised and projected, have been persistently below levels that are in line with its aim. Accordingly, if the medium-term inflation outlook continues to fall short of its aim, the Governing Council is determined to act, in line with its commitment to symmetry in the inflation aim. It therefore stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner".

In this context, the Governing Council has tasked the relevant Eurosystem Committees with examining options, including ways to reinforce its forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases.

Aneeka Gupta, from WisdomTree said: “The ECB remains stubbornly stoic, falling short of market expectations. It has decided to leave the deposit rate unchanged at -0.40% but sets up the stage for a rate cut ahead at its meeting in September... European financials reacted positively to the possibility of tiering by the ECB. The markets were expecting to receive more stimulus at this meeting after the release of the weaker manufacturing PMI and IFO data from Europe and Germany respectively at the start of the week. The German bund yield fell to a record low of -41bps as the ECB opens up the option of further QE.”

Also today, the Governing Council of the ECB adopted an opinion on the recommendation from the Council of the European Union on the appointment of the future ECB President. It read: "The Governing Council has no objection to the proposed candidate, Christine Lagarde, who is a person of recognised standing and professional experience in monetary or banking matters."