March 12 (Reuters) - The European Central Bank approved fresh stimulus measures on Thursday to help the ailing euro zone economy cope with the shock of the coronavirus pandemic but unexpectedly kept interest rates on hold, a decision that may dismay markets.
The euro weakened after the decision was announced, with the single currency falling to the day’s low as investors rushed for dollars.
The following are analyst comments on the ECB’s strategy:
SEBASTIAN GALY, SENIOR MACRO STRATEGIST, NORDEA “The fact that the ECB didn’t go for more negative interest rates tells you about the complete lack of coordination between the United States and the EU. More negative interest rates are likely seen as a devaluation by the U.S. at the time of heavy trade negotiations and a travel ban.”
CHRIS SCICLUNA, HEAD OF ECONOMIC RESEARCH, DAIWA CAPITAL MARKETS
“I think the market response is understandable given the decision not to cut rates or make an explicit statement on issuer levels on asset purchases.
“At the same time there are some positive elements such as increasing asset purchases, especially on corporate bonds which is helpful.”
“It’s also helpful that the interest rate on TLTROs can be as low as -0.75%, so there is significant easing but no change in the headline interest rates is not got for the euro and highlights the limited ammunition that the ECB has left.”
STEPHEN GALLO, EUROPEAN HEAD OF FX STRATEGY, BMO CAPITAL MARKETS
“They tried to do shock and awe with the numbers — instead of saying per month they gave us the cumulative amount. We have to wait to see what they are buying.
I thought it was knife edge whether they would cut or not. I wouldn’t have been surprised if they had cut but in order to have a meaningful impact on the euro they would have to go more than 10 bps and that would not have been optically very good for them.” (Reporting by Carolyn Cohn, Dhara Ranasinghe; Editing by Toby Chopra)