Economy

No more rate cuts, European Central Bank says on Thursday

No more rate cuts, European Central Bank says on Thursday”

Meanwhile, recent economic developments in the currency bloc have been upbeat.

Above: Speculation that ECB President Mario Draghi would announce the Bank is heading towards ending its money-printing programme on June 8 has been quashed by a leaked inflation report.

The meeting of the ECB's governing council was dedicated above all to slight corrections to their communication, explaining that the risks for growth are now "broadly balanced" and no longer tilted to the downside.

The downgrade mainly reflected lower oil prices, Draghi said.

At that rate, the 19 countries that use the euro would see growth at 2.3% this year, almost double the rate of the United States, which is on course to grow 1.2%. Its monthly asset purchases will continue to total 60 billion euros a month and to run until at least December.

As expected, the European Central Bank kept its main interest rates on hold again, with the refinancing rate at 0 per cent and the deposit rate at minus 0.4 per cent.

"The flat and low profile of underlying inflation is related to weak wage growth, due to changes in the structure of the labour market". The measure pumps newly printed money into the economy in an effort to raise inflation toward the bank's goal of just under 2 percent, considered best for the economy. Against the yen, the greenback was down 0.06 per cent to 109.33 yen.

EUR/USD was at 1.1235 by 11.45 GMT from around 1.1239 ahead of the announcement, while EUR/GBP was at 0.8686 from around 0.8680 earlier.

Despite the fact that the European Central Bank has shifted to a "less dovish" stance, he pointed out that there had been no discussion on the possible tapering of the asset purchase program. The asset purchases are expected to end around mid-2018 and the first rate hike is likely in early 2018, added Nordea Bank. "For example, as banks struggle with profitability, they have to take additional risks", Schubert told DW. Deflation concerns are out of proportion as monetary easing mostly affected financial markets; a rollback will affect financial assets, not real inflation.

If and when the central bank starts to roll back its balance sheet, capital markets will be affected the most and, in the worst-case scenario, a market crash may precipitate.

However, it did close the door to further rate cuts. According to Commerzbank's Schubert, the governments of heavily indebted countries like Spain and Greece have been able to make enormous savings.

In the United States, former Federal Bureau of Investigation director James Comey was testifying before a Senate committee on Thursday and said he was disturbed by President Donald Trump's bid to get him to drop a probe into the former national security adviser. "Unpopular austerity need not cut so deep".



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