The euro reacted to the ECB’s announcements on Thursday by rising to its highest position against the US dollar in two weeks [Xinhua]
The euro hit a two-week high against the US dollar late Thursday after the European Central Bank (ECB) agreed to keep it’s current stimulus (quantitative easing) program as is with no change.
Just ahead of markets closing in Europe on Thursday, the euro rose 0.67 per cent to 1.134 against the dollar.
However, in a press conference following the ECB announcement, its chief Margio Draghi said that the bank’s central committees had the flexibility to modify the stimulus program.
The ECB kept firm to its decisions last March to expand its bond-buying stimulus program beyond September 2016.
The quantitative easing plan now involves the ECB buying back 80 billion euros ($90 billion) every month until the program terminates in March 2017 – a total stimulus of over 1.4 trillion euros.
But in its statement on Thursday, the ECB signaled it could past March 2017.
“The monthly asset purchases of 80 billion euros are intended to run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim,” the ECB statement said.
The interest rate on the main refinancing operations of the Eurosystem was lowered by 5 basis points to 0.00 per cent last March – and the ECB decided today to keep that rate steady.
The rate on the marginal lending facility remains at 0.25 per cent, and the deposit rate at minus 0.4 per cent.
This would mean that banks that hold money overnight at the central bank would have to pay for the service; it would, therefore, be in their benefit to encourage lending.
In a speech following the ECB statement, Draghi said that he acknowledged that the negative deposit rate was a challenge to banks, but insisted it wasn’t negatively affecting the ability to make loans. But he added that overall rates must remain low to allow room for Eurozone recovery from the impact of the 2008 global financial crisis.
On June 8, the ECB started to buy back bonds and corporate debt from companies, in addition to financial institutions.
The BRICS Post with inputs from Agencies
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