Investing.com – The European Central Bank (ECB) upgraded its growth outlook for the euro zone on Thursday and gave a less dovish signal on interest rates in what was euro area monetary authority’s first effective tightening of policy since former ECB president Jean-Claude Trichet hiked rates in 2011.
The ECB kept monetary policy unchanged on Thursday with the main refinancing rate left unchanged at 0%, the rate on bank overnight deposits kept at -0.40%, while the rate on the marginal lending facility, or emergency overnight borrowing rate for banks, stayed at 0.25%.
The central bank also left unchanged its €60 billion ($67.5 billion) per month asset purchase program and kept its promise to run the accommodation “until the end of December 2017, or beyond, if necessary”.
However, the ECB did present a less dovish stance on interest rates as it revealed that it expects policy rates to remain “at present levels” for an extended period of time, compared to its previous wording of “at present or lower levels”.
ECB president Mario Draghi indicated that, while there were still “downside risks” to the euro zone economy due primarily to global factors, the monetary authority now considers "risks to the growth outlook are now broadly balance."
Draghi explained that the ECB had increased growth forecasts, raising their GDP forecast for this year to 1.9%, from the prior 1.8%. Projections for 2018 and 2019 were also raised by 0.1% to 1.8% and 1.7%, respectively.
Regarding inflation forecasts, estimates were cut for the next few years with Draghi explaining that it was mainly due to oil prices.
The ECB cut the estimate for consumer price inflation (CPI) for 2017 to 1.5%, from 1.7% previously. 2018 was now seen to be only 1.3%, down from the prior 1.6%, while 2019 was dropped to 1.6% from the earlier 1.7%.
Draghi revealed in the question and answer period that, while there was no vote on the decisions, he “did not hear any dissenting voices”.
Despite the fact that the ECB has shifted to a “less dovish” stance, Draghi pointed out that there had been no discussion on the possible tapering of the asset purchase program.
Just after the end of Draghi's press conference, the euro remained under pressure. At 9:18AM ET (13:18GMT), EUR/USD traded at 1.1214 compared to 1.1228 prior to the speech, while EUR/GBP was at 0.8684 from 0.8678 earlier.
Meanwhile, European stock markets were trading mixed. The Euro Stoxx 50 rose 0.23%, Germany's DAX gained 0.26% while France’s CAC 40 fell 0.14% and London’s FTSE 100, under pressure from election jitters, lost 0.26%.