The European Central Bank held main interest rates for the eurozone steady Thursday, in line with market expectations.
The ECB's governing council kept at zero the interest rate on the main refinancing operations of the eurosystem, which provides the bulk of liquidity to the banking system. Overnight credit for banks, known as the marginal lending facility, was kept at 0.25%. And the interest rate on the deposit facility, which banks in the region may use to make overnight deposits, held at -0.4%.
In an introductory statement at a news conference Thursday, ECB President Mario Draghi said monetary policy measures need to be supported by other policy areas.
“In order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively to strengthening economic growth. The implementation of structural reforms needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost productivity and potential output growth.”
Regarding fiscal policy, Mr. Draghi said “all countries should intensify efforts towards achieving a more growth-friendly composition of public finances.”
In a reaction statement, James Athey, senior investment manager at Aberdeen Asset Management, said: “This was a pretty confusing and conflicting performance from Mr. Draghi. He's had to acknowledge that the growth outlook has improved and the risks to the outlook are more balanced without following that through into the inflation outlook. This is confusing the market and so it is whipping around as traders hang on every word.”
Mr. Athey said, at this stage, “it's better to just look beyond today. There's enough from today to suggest that we might see a material change in policy in June. But no one should get ahead of themselves. There's clearly not enough consensus on the governing council to allow Mr. Draghi to give an assured performance today.”
In a separate statement, State Street Global Advisors' Brendan Lardner, Europe, Middle East and Africa head of portfolio management in the active global fixed-income team, said: “Today, the governing council echoed the cautious stance that has been in place over much of the last year, signaling that the current stimulus package would stay in place until at least the end of the year given the lack of self-sustaining core inflation.” He said populist risk in France further underpins the policy decision.