The European Central Bank (ECB) confirmed on Thursday the current level of key interest rates and the bond-buying program, slightly raising its estimate of economic growth in the eurozone for 2018, with bank chief Mario Draghi warning of the threat of protectionism.
At today’s meeting, the ECB’s governing council confirmed the existing key interest rates, including the minus 0.4 percent rate on deposits, which aims to discourage banks from hoarding money instead of lending it to the economy and citizens.
They also maintained the bond-buying program at monthly amounts of 30 billion euros until the planned expiration at the end of September this year.
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“Net purchases of securities at the current monthly amounts of 30 billion euros should, according to plan, remain in effect until the end of September 2018, or longer if necessary, in any case as long as the governing council concludes that inflation movements over a longer period are aligned with the targeted inflation rate,” the statement said.
The ECB indicated that it could extend the 2.55 trillion euro bond-buying program even after the set deadline if necessary.
In the statement usually released after the regular meeting, they omitted only the part that discusses a potential increase in the amount of monthly asset purchases.
Reviving growth in the 19-member economy with generous incentives, the ECB has very cautiously begun to rein in economic support, fearing that a larger change could undo the fruits of their previous efforts.
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The ECB president announced today slightly improved forecasts for the eurozone’s economic growth rate for 2018, expecting growth of 2.4 percent, compared to the previously projected 2.3 percent. The projections for 2019 and 2020 were confirmed, expecting growth of 1.9 and 1.7 percent, respectively.
Among the risks, he highlighted “the strengthening of protectionism,” referring to U.S. announcements of tariffs on steel and aluminum imports. Although their direct impact is expected to be limited, U.S. moves stir general concern about the state of international relations, Draghi explained.
“If you impose tariffs on your allies, one wonders who your enemies are,” said the ECB chief at a press conference.
The European Union has stated that it will respond to the announced U.S. tariffs in kind in the short term.
And while the ECB’s incentives have yielded the desired results regarding growth, inflation remains significantly below the targeted level of just under two percent. In February, it slipped to the lowest level in 14 months, at 1.2 percent, according to estimates from the European statistical office.
