ECB downgrades economic growth and inflation forecasts
The European Central Bank downgraded its economic growth and inflation forecasts for 2017 slightly on Thursday as it announced it was keeping its policy unchanged.
The ECB cut is 2017 economic growth forecast to 1.6% from its estimate in June of 1.7% amid risks following the UK’s vote to leave the European Union. The central bank nudged down its inflation forecast for next year to 1.2% from 1.3%.
“For the time being, the changes are not substantial enough to warrant a change in policy,” ECB President Mario Draghi said at a press conference following the policy announcement. “There is no question about the will to act, or the ability to do so.”
The ECB’s Governing Council decided to keep all of its key interest rates unchanged, in a move widely expected by analysts. The monthly asset purchase programme was also left at €80bn until March 2017, which was also anticipated.
Draghi was questioned by reporters about the possibility of expanding quantitative easing but refrained from providing any hints. He said that an extension of the asset purchase programme was not discussed at this month’s meeting.
However, he reiterated that the ECB would “act by using all the instruments available within our mandate” if warranted.
Craig Erlam, senior market analyst at Oanda, said: “All things considered, today was not the event it was built up to be. However, it is clear that the ECB is working towards some significant changes to the QE programme, even if that doesn’t necessarily mean more stimulus in the short term. Whether that takes three or six months isn’t really too important.”
The euro rose 0.23% against the dollar to $1.1265.