ECB holds monetary policy steady; another rate cut not far away - ICICI Bank : Treasury Research

As expected, the European Central Bank (ECB) decided to keep the key policy rate unchanged at 0.50%, broadly in line with market expectation. Accordingly, the ECB left the interest rate on its deposit facility and marginal lending facility unchanged at 0% and 1.0% respectively.

However, the ECB President re-assured the market that the monetary policy will remain accommodative for as long as necessary. This is the first time when ECB has used the phrases "lower levels" and "extended period of time" as part of the introductory statement.

To sum up, it would not be unfair to consider this meeting as a deviation from the norm, which could be considered historic, as the language was changed considerably. On a positive note, it hinted at further monetary easing.

Mr. Draghi also stressed on these new phrases again and again in the Q&A session, and provided further credence to a rate cut by stating that 0.50% is not the lower bound for the policy rate and extended period is not 6 or 12 months.

Source : Equity Bulls

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