In her first policy meeting as head of the ECB, Christine Lagarde left the uber-dovish momentum put in place by her predecessor, Mario Draghi, untouched, and moments ago the ECB kept all its three rates unchanged as expected, noting that rates would remain "at their present or lower levels" until the ECB nears its inflation goal, i.e. never, and that the ECB will continue buying €20BN in bonds until "shortly before it starts raising the key ECB interest rates" (or until it runs out of German bonds to buy, whichever comes first). In short no surprises, and the market reacted accordingly, with the EURUSD and bunds not even pretending to move.
Full statement below:
- At today’s meeting the Governing Council of the European Central Bank (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%, 0.25% and -0.50% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
- On 1 November net purchases were restarted under the Governing Council’s asset purchase programme (APP) at a monthly pace of €20 billion. The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.
- The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
And now attention turns to Lagarde's first press conference and - in continuation of a trope started under her predecessor - what color tie she will be wearing (we jest; we know the only accessory with her will be her money-printing Berkin). As a reminder, in her first speech, Lagarde stated that the ECB’s strategic review would begin soon.
As such, today's press conference may reveal more information about this, and could come with a formal announcement. And among many other policy/mission tweaks for the convicted criminal-cum-central banking climate crusader, Rabobank sarcastically adds, "will it include a pledge to also do ‘whatever it takes’ to get to the Eurozone to net-zero carbon emissions?"