The European Central Bank rather expectedly decided to keep the main interest rate at 0,00%, as we have speculated in our "Weekly Expectations" material from earlier this week, in which we also advised you that a key feature in Draghi's post-decision statement was going to be the ECB's opinion on the impact of the inflation rate for the bloc's prospects for sustained economic growth (you can read more about it here.)
In fact, Mario Draghi stated that precisely because of the low inflation rates, the ECB is maintaining its current forecasts for weak economic growth expectations at least until the end of the year, confirming what he said previously in the last policy meeting in May (read more in out article here), also saying that because of that it is unlikely that the central bank will consider raising the rates anytime soon. In accordance with our other forecast about the meeting, Draghi commented on the Targeted Long-Term Refinancing Operations program, or TLTRO 3, (which is set to commence in September) and the importance for providing a steady and easily accessible source of financing for small and medium-sized economic enterprises.
Overall, the ECB's primary focus remains to be reaching the targeted 2% inflation rate as soon as possible, by means of boosting the liquidity of easy debt, through monetary programs such as TLTRO and others. Finally, the fact that the ECB is keeping the negative interest rates should not be perceived as a detrimental factor, indeed the market has already priced in the news, so there are no expectations of any price shocks.
Furthermore, ECB's determination to boost the inflation level through active monetary intervention programs seems to be outweighing the expressed concerns over the disconcerting forecasts for slow economic growth rates (mainly because of outside factors such as the trade war between the US and China). At any rate, the ECB's policy seems to be backing up the investor confidence in the long-term efficiency of its programs, and as a result, the EUR is currently gaining momentum.
In today's trading session the Euro rose with 0.32% against the Swiss Franc, as well as other major currencies, despite the initial market reaction. The EURCHF initially dropped, following Draghi's remarks about the ECB's concerns with the poor inflation performance, however, the market recovered from the initial shock, and as a result of his comments about the ECB's future policy, the price started rising once again.
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