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ECB stands pat; managers look toward December meeting for more direction

Mario Draghi
Mario Draghi

The European Central Bank left interest rates and its monthly asset purchase program unchanged, with money managers looking toward the bank's December meeting for guidance on future monetary policy.

Mario Draghi, president of the ECB, said at a news conference Thursday that the marginal lending facility — which provides overnight credit to banks from the eurosystem — will stay at 0.25%; the interest rates on the main refinancing operations of the eurosystem, which provides the bulk of liquidity to the banking system, remains at zero; and the interest rate on the deposit facility — used by banks to make overnight deposits — will stay at -0.4%.

The bank's asset purchase program, of €80 billion ($87.8 billion) per month, is intended to run until the end of March 2017, or beyond if necessary, in the bank's quest to reach a level of inflation at or close to 2%.

Money managers said the meeting revealed little new information, but did contest rumors of tapering by the ECB. “He (Mr. Draghi) also indicated a potential extension of the QE program was not discussed at this meeting,” said Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers, in a news release. “All in all, it is clear the December meeting will be key to set the stage for future monetary policy developments and the recent rise in bond yields does ease some of the implementation constraints facing the central bank.”

The money manager expects one extension to the current asset purchase program in the near term, and a subsequent move toward yield curve control-type policy, “as the focus of easy monetary policy shifts from quantity to explicit price targeting in coming months.”

Ian Kernohan, economist at Royal London Asset Management, said in a separate comment that a more appropriate time to discuss any tapering of the ECB's QE program “will be at the next ECB meeting in December, when bank staff have had a chance to revise their economic forecasts.”