ECB

The European Central Bank (ECB) made no changes to its record-low interest rates and announced no new measures on Thursday in what was its first policy decision of 2017. Specifically, the ECB left its benchmark interest rate unchanged at a record-low 0.0%, in line with forecasts.

The central bank also held its deposit facility rate steady at -0.4% and its marginal lending rate remained at 0.25%.
Additionally, the Governing Council confirms that it will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017 and that, from April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

The European Central Bank will extend its asset purchase program to the end of December 2017, but at a reduced monthly pace.

The ECB said on Thursday it would extend its so-called quantitative easing program by nine months, until at least the end of next year, taking its total size above €2.2 trillion ($2.36 trillion). But starting in April, the bank will reduce the value of securities it buys per month to €60 billion from €80 billion.

he European Central Bank (ECB) on Thursday confirmed monthly purchases of $80 billion in government paper, known as the quantitative easing (QE) programme while interest rates remained flat or come lower for a prolonged period with the principal rate at 0.00%, the bank deposit rate at -0.40% and refinancing rates at 0.25%.

In September, the main focus was once again the central banks, the ECB first of all, then the Bank of Japan and the Fed. Expectations were high in all three cases. To announce additional monetary easing in the first two, and guidance on anticipations and credibility in the third. The first two disappointed the market, announcing measures that fell well short of investor anticipations. Already in July, the BoJ opted to keep things as they stood even though a large proportion of investors expected to see further monetary easing. The Fed, for its part, struggled to overcome internal divisions and look beyond a month-by-month horizon, at the risk of making mistakes in its growth projections and damaging its credibility.

"Pure fantasy," in this way Michel Best, Bundesbank spokesman denied the rumor that European Central Bank (ECB) might be considering a taper after the bond buying program gets concluded in March 2017, which would be earlier than expected.

The ECB President Mario Draghi has vigorously defended the measures before German parliamentarians that in recent months had not spared criticism. In his speech at the Bundestag (German Parliament), he responded to German concerns by saying that "The rates have to be low today to allow a return to higher rates in the future" and that "to get all the benefits of monetary policy measures, other policies should contribute more firmly", both at national and European level.

The ECB ensures, in the monthly bulletin, that "Domestic demand remains supported by the pass-through of the monetary policy measures to the real economy". Although it provides for economic growth for next year, it will take place at a gradual pace. "Moderate global growth continued in the first half of 2016. Looking ahead, global growth is expected to recover gradually. Low interest rates, improving labour markets and growing confidence support the outlook for advanced economies, although the uncertainty generated by the referendum in the United Kingdom on EU membership will weigh on demand in that country.

The president of the Bundesbank, Jens Weidmann believes that the ECB can not stand still for too long: "Under no circumstances can interest rates remain so low for longer than is absolutely necessary with regard to price stability" he said on Monday.

The number one of the German Central Bank also does not take sides in a positive way towards extension of the quantitative-easing plan, which will expire in March 2017, but at the same time makes it clear they do not want to take for granted such a decision.