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ECB leaves rates unchanged, confirms plan to end asset purchases at end of year

Mario Draghi, president of the European Central Bank, speaks during the ECB rate decision news conference in Frankfurt on Thursday. The ECB confirmed it will cut bond-buying in half next month and anticipates that new purchases will be halted by the end of the year.

Bank of England also maintains interest rates at 0.75%

The European Central Bank left interest rates unchanged following its governing council's meeting Thursday, confirming it anticipates to be in position to end its quantitative easing program after Dec. 31, subject to inflation data.

The interest rate on the main refinancing operations of the eurosystem, which provides the bulk of liquidity to the banking system, was kept at zero. Overnight credit for banks, known as the marginal lending facility, was kept at 0.25%, while the interest rate on the deposit facility, which banks in the region may use to make overnight deposits, was held at -0.4%.

The eurozone's key interest rates are set to remain at present levels at least through the summer of 2019 and "as long as necessary to ensure the continued sustained convergence of inflation close to 2% over the medium term," Mario Draghi, president of the ECB, projected during the introductory statement of a press conference on Thursday.

Starting Oct. 1, the ECB will reduce its monthly net asset purchases to €15 billion ($17.4 billion) from the current €30 billion, which are set to last until the end of December. The ECB then intends to reinvest the principal from maturing securities bought under the asset purchase program for an extended period after Dec. 31.

"The governing council ... anticipates, subject to incoming data confirming our medium-term inflation outlook, that net purchases will then end," Mr. Draghi said.

"But we haven't elaborated on the inflation requirements. When we stop (however) — it doesn't mean that accommodative monetary policy will not be significant through reinvestments or rates," Mr. Draghi said.

"Recent market volatility and uncertainty from rising protectionist policies mean significant monetary policy stimulus is still needed. This support will be provided by the ECB until the end of the year and through reinvestments," Mr. Draghi said.

Iain Lindsay, co-head of global portfolio management in the global fixed-income team at Goldman Sachs Asset Management, commented in an emailed note that "the ECB reaffirmed policy rates will remain unchanged through summer 2019. We think this implies a rate hike in late 2019, rather than no rate move until early 2020 as priced by the market. Firmer wage growth data — particularly if sustained — will support the case for unwinding some monetary accommodation. However, we remain more dovish than the market in our medium- to long-term outlook for ECB policy, due to subdued underlying inflation dynamics."

Also Thursday, U.K.'s central bank kept interest rate unchanged. The Bank of England's monetary policy committee voted unanimously to maintain main interest rate at 0.75%, following the MPC's meeting Wednesday.

The MPC, which sets monetary policy to meet a 2% inflation target, also voted to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at 10 billion ($13 billion).

The committee also voted unanimously to maintain the stock of U.K. government bond purchases, financed by the issuance of central bank reserves, at 435 billion.