ECB pushes back rate hike again as outlook darkens
VILNIUS - The European Central Bank on Thursday ruled out raising interest rates in the next year and even opened the door to cutting them or buying more bonds as risk factors such as global trade war and Brexit drag the euro zone economy down.
He said policymakers had started to discuss options such as cuts to the ECB’s already record-low rates, further pushing out the timing of any hike or resuming a 2.6 trillion euro bond-buying program that only ended in December. Notably, investors took the ECB’s new message that rates would “remain at their present levels at least through the first half of 2020” as ruling out any cut until then. In March the Bank had said rates would stay at record lows until at least the end of this year.The ECB said it would give banks credit at rates just 10 basis points above its minus 0.
“With rates already at 0% and no fiscal levers to pull, options are somewhat limited. Turning the QE taps back on by the end of the year is an increasingly probable scenario,” said Nancy Curtin, Chief Investment Officer at Close Brothers Asset Management. With the ECB officially targeting an inflation rate of just below 2%, it still has some way to climb, however. Inflation has undershot this since 2013 and projections suggest it will continue to miss it for years to come.
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