REPORT
By Abdulselam Durdak
Frankfurt letter, March 13

- ECB holds rates, continues asset purchases

The European Central Bank (ECB) has not changed its interest rates in line with market expectations.

At last week's meeting, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00 percent, 0.25 percent and minus 0.40 percent respectively.

Following the announcement of the interest rate decision, ECB President Mario Draghi announced at a press conference that based on regular economic and monetary analyzes, they decided not to change the key interest rates.

He said they expected that rates would remain at present or lower levels for an extended period of time, and “well past the horizon of our net asset purchases.”

Draghi also confirmed that the asset purchase program would continue to be at the current monthly pace of €80 billion until the end of this month. From April 2017, the monthly asset purchase program would continue at €60 billion until the end of December 2017, and could be extended if necessary.

New inflation and growth forecasts were also announced at the meeting. The ECB now expects growth of 1.8 percent in 2017 and 1.7 percent in 2018, compared with earlier forecasts of 1.7 percent and 1.6 percent, respectively. 

Meanwhile, Draghi said that inflation should reach 1.7 percent in 2017 and 1.6 percent in 2018, up from previous predictions of 1.3 percent and 1.5 percent respectively.

The ECB left its forecast of 1.6 percent GDP growth and inflation for 2019 unchanged.

 

-GDP rises 0.4 percent in euro area in 4Q16

Seasonally adjusted GDP rose by 0.4 percent in the euro area and by 0.5 percent in the European Union (EU) during the fourth quarter of 2016, compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union. In the third quarter of 2016, GDP grew by 0.4 percent in both zones.

Household final consumption expenditure had a positive contribution to GDP growth in both the euro area and the EU and the contribution from gross fixed capital formation was also positive in both zones. The contribution of the external balance to GDP growth was negative for the euro area but positive for the EU, while the contribution of changes in inventories was positive for the euro area and negative for the EU.

13 Mar,2017

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