Closed ECB rate decision – as it happens

The European Central Bank has kept rates and policy on hold in April after delivering a raft of cuts last month.

The key focus of president Mario Draghi’s press conference – which begins at 13.30 London time – will be the fraught relationship between the central bank and the eurozone’s largest economy. Germany politicians have been lining up to criticise the ECB’s easing policy, which have hurt German savers and smaller German banks that rely on interest income.

Key developments

  • Headline deposit rate held at -0.40%
  • More information on the corporate bond buying process will be released after the press conference
  • Statement from the council says that the focus is “is now on the implementation of the additional non-standard measures”
  • ECB has started to expand monthly purchases under the asset purchase programme to €80bn
  • The ECB will buy bonds from all non-banks with above an unspecified credit rating, including maturities up to 30 years.

By Emily Cadman and Chris Giles


Welcome to our live blog of today’s monetary policy action. To give you a brief recap on the timings. At 12.45 London time we will get the policy decision and then at 13.30 Mario Draghi’s press conference will start


The markets are not expecting any policy changes, and are instead mainly interested in getting further details about the purchases of corporate bonds that were announced last month.


But perhaps the main focus will be on divisions within the council, after a storm of criticism from Germany.

Here is the FT’s preview from Claire Jones in Frankfurt and Stefan Wagstyl in Berlin.

Will the ECB fend off German criticism?


In other monetary policy news, earlier today the Swedish Riksbank decided to keep keep the repo rate unchanged at -0.50%. However it surprised expectations by announcing a further extension of quantiative easing in an effort to hold down the krona and stop inflation from swooning further. And once again, it has stressed that it’s ready to do more.

Ironically, given the central bank’s fixation on holding down the currency, the krona jumped in response.

There is more from FastFT here


The other big topic at today’s press conference is likely to be the limitations of negative interest rate policy. In less than two short years, negative interest rates have gone from being a subject for fireside speculation to a reality for nearly a quarter of the global economy.

But many central bankers – including the Bank of England’s Mark Carney have become increasingly vocal about the downsides of negative rates. He has been outspoken in his belief that if retail customers are protected, negative rates mainly target exchange rates.

On the other side of the coin, with slowing global growth and subdued inflation many economists are still in need of stimulus.

Negative interest rates: battle lines drawn before IMF meetings



However, despite the additional easing, the euro has still appreciated by around 4 per cent against the dollar this year.

This means that currency strategists will be alert for attempts from Draghi to talk down the euro. This is from Joshua Mahony, market analyst at IG:

These meetings always provide Mario Draghi with the stage to push the euro lower, which is likely to be on the agenda

With the ECB already running at full capacity, it will be interesting to see if Draghi can pull one more rabbit out the hat at today’s meeting.


BofA Merrill Lynch has put out a useful cheat sheet on what to watch out for. Its main focuses are:

1) How vocal will Draghi be on central bank independence?

2) Will Draghi elaborate on “helicopter money”?

3) Will Draghielaborate on the “lower bound”?

4) Will Draghi enter”verbal intervention mode” on FX?

5) Will Draghi elaborate on “asset scarcity” and technical changes to QE?

Rates on hold


And rates are kept on hold as expected. Here is the full statement:

At today’s meeting the Governing Council of the 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.

Regarding non-standard monetary policy measures, we have started to expand our monthly purchases under the asset purchase programme to €80 billion. The focus is now on the implementation of the additional non-standard measures decided on 10 March 2016. Further information on the implementation aspects of the corporate sector purchase programme will be released after the press conference on the ECB’s website.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.


The euro held steady close to its six-month high against the dollar on the expected decision.

The focus now shifts to the press conference, beginning in a little over 30 minutes


Ken Wattret , co-head of European Market Economics, at BNP Paribas has been reading the runes on the statement.

Pointing to the sentence “the focus is now on the implementation of the additional non-standard measures decided on 10 March 2016.” he said in a note to clients:

“In other words, don’t be expecting any additional measures any time soon, implementation is the priority for now.”


Here is the FT’s full news story from Claire Jones in Frankfurt.

And her preview of what to expect from the press conference:

Mr Draghi could also face questions on what the ECB will do next should inflation, which is now zero, continue to elude policymakers’ target of below but close to 2 per cent. One option that has excited economists is helicopter money, which would involve the eurozone’s central bank giving away cash to members of the public.

Mr Draghi suggested last month that such an option could be within the ECB’s scope, saying it was an “interesting idea” although it “clearly involves complexities, both accounting-wise and legal-wise”.

Such measures would provoke fierce criticism in Germany, where the ECB has recently come under fire over its policy of low interest rates.

ECB keeps interest rates on hold


And over on the markets desk, the FT’s Elaine Moore reports that:

News that the ECB has not opted to alter rates left prices across Europe’s bond market steady. Ahead of the meeting prices across the market were down, sending the yield on Germany’s benchmark 10 year Bund to a month high of 0.22 per cent.

In addition to expectations that Mario Draghi will not provide markets with indications of further economic stimulus, the fall in bond prices has been attributed to stronger oil prices and increasingly positive inflation expectations, which subdue appetite for fixed income assets such as government debt.

The euro held fast, trading at $1.13 against the US dollar.


And just a reminder of where inflation is at present…


And what that has meant for interest rates:


And some of the German political backdrop:


A few minutes to go until the press conference and the euro has picked up to a session high. This from the FT’s currency correspondent Roger Blitz

https://twitter.com/rogerblitz/status/723111744386809856


Draghi is now just arriving… so we are about to start

Rates to remain at “present or lower levels” for an extended period


Draghi says he continues to expect rates to remain “at present or lower levels for an extended period of time”


Asset purchases (QE) will continue to run until the governing council sees a “sustained adjustment” in the inflation rate, Mr Draghi says. So for some while yet then


Mr Draghi is now talking up the success of last month’s measures. He says that credit conditions have begun to improve. But he reiterates that there are still challenges ahead and there is a need to ensure that low inflation does not become entrenched


The risks to the economic recovery are still “tilted to the downside” Draghi says, striking a gloomy note. He particularly highlights global geopolitical risks. And, as is his custom, the lack of structural reform.


Inflation could turn negative in the next few months he warns, though the ECB still expects inflation to recover in 2017


Draghi is so far sounding more dovish than expected – and the Euro has subsequently weakened slightly.


And now the first question….


Cheeky question: Would Draghi speak at the German central bank if he was asked? This is a nod to the recent rows.

Draghi stresses that the ECB has “a mandate to pursue price stability for the whole eurozone, not just for Germany”.

The governing council was “unanimous” in defending the independence of the ECB and the current monetary stance in a discussion this morning, Mr Draghi says.


A question on helicopter money gets a brush off from Draghi.

He repeated what he said last time that the ECB “hasn’t really thought or talked about” the concept, generally thought to be a process of creating money and spreading that out across citizens.

Pouring more cold water on the idea without dismissing it out of hand, Draghi added that it was “fraught with legal and institutional difficulties” before repeating that the governing council has not discussed it.


“Our policies work and they are effective. Just give them time to fully display their effects,” Mr Draghi says. Adding that structural reforms would make them quicker…

Draghi hits back at criticism from German politicians



If the ECB had not put into place the policies it has since mid 2014, staff projections suggest growth would be 1.6% less than it will be and inflation would have been negative


Speaking about corporate bonds, Draghi confirmed that the ECB would buy bonds from all non-banks with above an unspecified credit rating, including maturities up to 30 years. He said these will contribute to the E80bn a month total without saying how much. The implication is not to expect that much.


This is from Elaine Moore who is watching the markets:

Even though Mario Draghi started the press conference with a punchy line about interest rates staying low or lower, eurozone bonds are still out of favour with investors. Prices for benchmark 10 year German bonds have fallen further, pushing the yield up to 0.24 per cent.


The full opening statement is now up on the ECB’s website here


The FT’s Claire Jones is now up asking which of the global financial uncertainties are of particular concern and secondly whether any form of helicopter money would be compatible with the law?

Draghi bats the question on helicopter money away: “We’ve never discussed it”.

On the global outlook, he doesn’t really give a clear answer.

Instead he says that the ECB’s monetary policy course will continue to diverge from other economies that are recovering better – a clear reference to the United States.

He repeats again that the governing council stands ready to act again if needed.

Take what you will from that


Draghi has repeatedly said all policies are still on the table should events change, although he insists the exchange rate is not a policy target.

Responding to a question on whether interest rates can fall further into negative territory, he says the governing council is aware of the “increasing complexities ” of negative rates. He says the experience of negative rates is so far “broadly positive”.

He says that for banks, net interest income rose in 2015, the first year of negative rates. There was no evidence of these rates being passed through to borrowers or depositors, he adds.

But he says, despite the good experience, the ECB was limited in how negative rates could go and things get more complicated the more rates fall. That said, he ends his answer saying the ECB has all its tools available, so he is not ruling our further limited cuts.


With rare exceptions, the ECBs monetary policy has been “the only policy in the past four years to support growth”, Mr Draghi says in another swipe at politicians.

That is why he is making a renewed emphasis on the need for structural reforms Mr Draghi says – slightly wearily.


It’s the German savers’ question. Draghi can’t decide whether to sound sympathetic or to slap the question down and after starting down the “I fell your pain” route, decides in the end that attack is the best form of defence.

He says pension funds and insurance companies should not blame the ECB for their own investment failures; they have made huge capital gains from the ECB buying bonds under QE; low interest rates are a global phenomenon; and that if you want higher interest rate you need higher growth and inflation, which is exactly what low interest rates are trying to achieve.

Take that old Germans.


More on the criticism that has been emanating out of Germany – and from finance minister Wolfgang Schäuble.

Mr Draghi says that Mr Schäuble has since withdrawn his comments ultra low-interest rate policies were “50 per cent” responsible for the rise of the rightwing Alternative for Germany party, which made big gains in regional polls last month.

When the two spoke at the IMF meeting in Washington, discussions were productive and “friendly” he adds.


A question for Brits. Is the UK Brexit debate already harming the eurozone economy?

No, says Draghi, the effects such as lower sterling so far are not enough to endanger the eurozone recovery.


The press conference is now drawing to a close. Draghi repeats that the council has not discussed expanding the asset purchases programme to other assets such as equities.

And we are done.


But Germany’s intervention, by undermining the perception of independence of the ECB, is dangerous, Draghi says. It delays the recovery.

So Germany matters, Britain doesn’t as far as Draghi is concerned


In summary: the main news lines from the press conference were all about politics.

Mr Draghi slapped down criticism from German politicians that the accommodation easing policies were hurting savers with a pointed reminder that the ECB obeys the law “not politicians.”

He also emphasized that the ECB has a mandate to ensure price stability across the whole eurozone not just Germany. He stressed that the governing council was unambitious in defending the independence of the central bank.

The mood was slightly more dovish than had been anticipated, with Mr Draghi repeating that inflation could turn negative again in the current months. But he batted away a number of questions about the possibility of helicopter money, saying it was something the council had not discussed.

That’s it from us for today. Thanks for tuning in