FRANKFURT (Reuters) - The European Central Bank kept its policy unchanged as expected on Thursday, announcing only a nuanced change in its guidance to remain on track for ending bond buys this year and keeping record low interest rates at least through next summer.
With inflation rebounding and growth leveling off at a reasonable pace, the ECB has been removing stimulus in modest steps. It is likely to continue moving by the smallest possible increments, fearing that anything bigger might set off market turbulence and unravel years of work.
In a well-telegraphed move, the ECB said it will halve bond purchases to 15 billion euros a month from October, firming up a previous guidance that it “anticipates” such a move. But it still expects to end its 2.6 trillion euro asset purchase scheme by the end of the year, suggesting that a formal decision on ending quantitative easing will come later.
The bank kept unchanged its guidance on interest rates, a more closely watched item as its sets the course for monetary policy for a year, an unusually long horizon for a central bank.
“The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary,” it said, repeating its guidance.
Attention now turns to ECB President Mario Draghi’s 1230 GMT news conference, at which he will unveil quarterly macroeconomic projections. Markets will also look to see whether Draghi maintains the ECB’s stance that growth risks are broadly balanced.
Inflation forecasts are unlikely to change, a Reuters poll of analysts showed, but the growth outlook is subject to downside risks due to increased trade protectionism and economic turbulence in key emerging markets.
With Thursday’s decision, the ECB’s rate on bank overnight deposits, which is currently its primary interest rate tool, remains at -0.40 percent.
The main refinancing rate, which determines the cost of credit in the economy, remained unchanged at 0.00 percent while the rate on the marginal lending facility — the emergency overnight borrowing rate for banks — remains at 0.25 percent.
Reporting by Balazs Koranyi; Editing by Catherine Evans