Yesterday’s decision of the European Central Bank to keep interest rates at the same rate has received broad backing from funds industry analysts.
The decision, taken at the ECB’s monthly policy meeting, means that its key interest will remain at 0% for the forseeable future.
Nevertheless the central bank removed a suggestion from its closely-watched forward guidance that the rate could fall into negative territory.
At the same time the bank revised upwards its forecast for economic growth for the eurozone for 2017 from 1.8% to 1.9%.
The bank also increased its growth expectation for 2018 from 1.7% to 1.8% and from 1.6% to 1.7% for 2019.
Meanwhile the bank downgraded its outlook for inflation for 2017 from 1.7% to 1.5% – meaning that it is now further away from its target for inflation of close to, but below, 2%.
Aberdeen Asset Management Senior Investment Manager Patrick O’Donnell said: “The ECB is essentially in a holding pattern, waiting for more positive inflation data to come in.
“There’s no appetite to risk choking off the growth that the economy has been seeing of late. Doing nothing is probably the right decision at the moment.
Anna Stupnytska, an economist at Fidelity International, pointed out that, while tweaks to the ECB’s language in its statement pointed to a removal of the easing bias on the interest rate side, the forward guidance on its quantitative easing programme had been kept in place.
“Although growth forecasts were nudged up, inflation forecasts were revised down, sending mixed messages as to ECB’s future intentions on policy normalisation,” she said.
©2017 funds europe
