At today's press conference after the meeting of the ECB Governing Board, ECB President Mario Draghi remained under the expectations of analysts with the announced measures to boost inflation and revive the economy. The ECB funds rate is left its at the previous 0.05%, the deposit rate for banks, however, was reduced by 10 basi points to minus 0.30%. The euro reacted with gains, the European stock markets showed losses.
ECB opens money floodgates less than expected
Right at the beginning of the press conference, the ECB President presented the measures decided at the meeting. Although they go in the expected direction, they do not meet analysts' expectations in its scope. The bond purchase program of the ECB, initially until September 2016 monthly 60 billion euros should be pumped into the markets with it, shall be extended until March 2017. Optimistic assessments were an extension of indefinitely. At the same time, however, Draghi noted that this is not a irrefutable timetable, and the program may be extended accordingly if necessary. Overall, the duration, the volume and the structure of the program could be adjusted, as the ECB chief stressed. So could other securities be included in the program, like such from cities and local authorities.
A further point, which was already expected in the run-up to the meeting, is the further lowering of the deposit interest rate. This was with minus 0.20 percent already on a negative level, and was now lowered further by 10 basis points to 0.30 percent. With this measure the Bank lending should be stimulated by increasing the cost of parking funds at the ECB. In analyses in advance assumed, that the interest rate will be reduced by 15 basis points, some spoke even about necessary 20 basis points, to achieve the desired effect. Thus the measures remained here short of expectations before the ECB meeting.
Markets respond disappointed to the ECB decisions
When it became clear that the predictions made before of the ECB meeting are not met, the disappointment in the markets was clearly visible. The Euro STOXX 50 index declined by 3.28%, and the German benchmark index DAX lost 3.58% as a result. Today, the rate of the euro has benefited from the decisions of the ECB. The European single currency had suffered already hefty losses in the past few weeks through the expectations from decisions of the ECB meeting, and was in the morning still at less than 1.06 dollars. After the ECB press conference the euro increased above the 1.09 dollar mark and quoted currently at 1,0946, which corresponds to an increase of 3.14%.