- ECB Meeting: no surprises
Last week, the markets closely watched the European Central Bank’s (ECB) rate decisions and ECB President Mario Draghi’s press conference.
Furthermore, IHS Markit's Purchasing Managers’ Index (PMI) survey was also the focus of markets.
At its monetary policy meeting last Thursday, the ECB kept its asset purchase program unchanged and interest rates at record lows.
The Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility would remain unchanged at 0.00 percent, 0.25 percent 0.40 percent, respectively.
The Governing Council confirmed that the asset purchase program (APP) would continue at a monthly pace of €30 billion from January 2018 until the end of September 2018 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 ECB also raised its growth forecasts significantly, especially for the coming year.
However, at last week’s press conference, Draghi stressed that a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up and support headline inflation developments in the medium term.
“If the outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase our asset purchase program in terms of size and/or duration,” he said.
Draghi said the structure of the bond-buying program or a change in guidance was not discussed on Thursday, but he acknowledged that the outlook for interest rates would gain importance in the coming months.
In short, Draghi’s headline message at last week’s press conference said in spite of surprisingly healthy economic numbers, the ECB’s monetary stance would remain accommodative for some time to come.
-PMI data
According to a flash estimate of the economic research institute IHS Markit Economics, the Euro Area composite PMI rose 58 points in December from 57.5 points in November.
The PMI data, which saw the highest level in the last 82 months, is also above the market expectation of 57.2 points.
Looking ahead, the data points to thriving economic expansion for 2018.
-The week ahead
This week, Eurozone inflation data will be released and speeches of ECB officials could well be reflected in the markets.