ECB delays interest rate hike

ECB delays interest rate hike

 

 

 

 

The ECB announced on Thursday that it will not raise interest rates before 2020, as it had previously indicated.  The widely anticipated moves comes in reaction to continued economic sluggishness across the Eurozone which saw the ECB slash its growth forecast from 1.7% to 1.1%. ECB President Mario Draghi cited a number of factors for the slowdown including: uncertainty over Brexit, slower world trade, rising protectionism and weakness in some emerging markets.

Interests rates across the Eurozone have not been raised since 2011 and Draghi had previously indicated the intention to raise them during Summer 2019. Now it looks likely that no such hike will take place before the end of his term in October. All ECB base interest rates remain unchanged, meaning a base deposit rate of -0.4% and a refinancing rate of 0%.

As well as maintaining the base interest rates, Draghi also announced a new measure to stimulate growth: Targeted Long-Term Refinancing Operation (TLTRO III) will start in September 2019 and end in March 2021, each with a maturity of two years.

These new measures are intended to help preserve favourable bank lending conditions and the smooth transmission of monetary policy.