ECB keeps policy measures unchanged
The European Central Bank decided to keep key interest rates and the asset purchase programme unchanged on Thursday.
Interest rates on main refinancing operations, the marginal lending facility and the deposit facility were left at 0.0%, 0.25% and -0.40%, respectively.
Asset purchases will continue at a monthly pace of €80bn until the end of March before tapering to €60bn a month until the end of December.
The decision to stand pat on policy came as no surprise to analysts who believed the ECB was unlikely to make any changes after last month’s decision to extend the quantitative easing programme by nine months.
Speaking at a press conference after the policy announcement, ECB President Mario Draghi said the central bank stands ready to increase its asset purchases in size and duration if necessary.
Draghi struck a dovish tone on inflation, saying there were no signs yet of a convincing upward trend in underlying consumer prices.
"Headline inflation is likely to pick up further in the near term, largely reflecting movements in the annual rate of change of energy prices,” he said.
“However, measures of underlying inflation are expected to rise more gradually over the medium term."
Data from Eurostat showed eurozone inflation jumped to 1.1% year-on-year in December from 0.6% in November, boosted by an increase in energy prices.
The euro fell to a 10-day low against the pound to 86.26p following Draghi's remarks on inflation.
Neil Wilson, senior market analyst at ETX Capital, said: "We haven’t learned anything new today really – the ECB was always expected to stand pat. However, Draghi did sound a fair bit more dovish than we thought possible given the recent data, which has pointed to a positive uplift in Eurozone growth and inflation. We got the usual low rates now so we can have higher rates later trick. Some might have expected him to sound a bit more bullish, but he’s obviously worried about the political risks steaming his way – Trump, Brexit, German & French elections etc."