Rate Decision and Economic Forecast, September 2020


European Central Bank (ECB) President Christine Lagarde addressed a press conference on the outcome of the Governing Council meeting in Frankfurt, Germany on 23 January 2020.

Ralph Orlosky | Reuters

The European Central Bank announced on Thursday that it was keeping its interest rates and coronovirus-stimulus program unchanged, despite a strong euro pressure on policy makers.

The euro, which is closely watched by the central bank, has risen more than 5% against the dollar since the beginning of July and was trading around $ 1.1846 just after the decision. A stronger currency makes imports cheaper, kills euro area exporters and tightens the financial situation for the broader economy.

The surprisingly low inflation rate in August, the lowest since 2001, also raises the question of whether the ECB will have to do more to improve the euro economy.

The ECB has decided not to take any major action for now, although investors will continue to watch the upcoming press conference of central bank chief Christine Lagarde for any policy.

The interest rates on ECB’s main refinancing operations, marginal loan facility and deposit facility remain unchanged at 0.00%, 0.25% and -0.50% respectively. While the bank’s pandemic emergency procurement program totals 1.35 trillion euros ($ 1.6 trillion).

The ECB said in a statement, “These purchases contribute to easing the overall monetary policy stance, helping to mitigate the impact of the epidemic on the projected path of inflation.”

In June, the ECB projected annual inflation to reach 0.3% at the end of 2020 – lower than its target of about 2%. It is estimated that inflation will increase to 0.8% in 2021 and 1.3% in 2022.

The central bank also contrasts 8.7% in GDP in 2020, followed by a rebound of 5.2% and 3.3% in 2021 and 2022 respectively.

This is a breaking news and will be updated soon.

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