European Central Bank holds rates steady and reaffirms ultra-easy monetary policy

European Central Bank leaves interest rate unchanged, despite slowing of EU economic growth

The bank's 25-member governing council said Thursday that it was holding its benchmark refinancing rate at a historic low of zero, with analysts not expecting the bank to deliver a fresh rate hike until around the middle of 2019.

"Overall, growth is expected to remain solid and broad-based", he said, adding that inflation should average 1.5% this year.

"The main takeaway is that nothing has changed in the ECB's policy stance and they remain on course to taper later in the year", said Marchel Alexandrovich, European financial economist at Jefferies.

Unpaid loans at large euro zone banks totalled 759 billion euros at the end of September, having fallen from 920 billion euros only a year earlier thanks to strong economic growth and ECB pressure on banks to offload them.

Weaker-than-expected economic data out of the euro zone has raised question marks about that, but policymakers remained comfortable with the policy path priced in by investors, the sources said.

Traders have initiated a sharp sell-off in the Euro following the April European Central Bank (ECB) event, resuming a trend that has been in place over recent days.

The bank also confirmed that the net asset purchases, at the current monthly pace of Euro 30 billion, will run until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

The euro gained as much as 0.4% against the United States dollar and traded at $1.2182 at 3:50pm in Frankfurt. While the greenback's strength is primarily due to higher U.S. bond yields in the past weeks, further good news via growth hard data would push the USA dollar even higher, at the expense of a weak Euro.

Draghi also warned in Washington last week that rising protectionism might already be hurting business and consumer sentiment.

With Thursday's decision, the ECB's rate on bank overnight deposits, which is now its primary interest rate tool, remains at -0.40 percent.

World markets remained edgy on Thursday, with shares eking out gains amid concern over the global economic outlook and with U.S. bond yields at four-year highs after breaking above the psychologically significant 3% line this week.

"Over the coming months we'll see a reduction in bond buying and it's likely that interest rates will remain unchanged until the end of the year as Draghi takes the time to wait and see how growth picks up". A spokesman for the Austrian central bank wasn't immediately available for comment. The impact of the euro's strength has been relatively limited so far.

This story has not been edited by Firstpost staff and is generated by auto-feed.

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