ECB changes its direction on forward guidance on interest rates

No surprises with the European Central Bank (ECB) interest rate decision which has remained unchanged at 0%, however, the view of their stance changed when the word “lower” was dropped in their statement.

“The Governing Council expects the key ECB interest rates to remain at their present or lower levels for an extended period of time and well past the horizon of the net asset purchases.” the statement said.

Those who paid attention to the above statement would have noticed that the important word is “or lower levels”. It does not guarantee anything, but nevertheless, should not be dismissed.

ECB President Mario Draghi said that the ECB expects the presents levels to remain for an extended period of time and beyond their net asset purchases.He also mentioned that their current net purchases of 60 billion a month are intended to run until the end of December 2017 or beyond.He also mentioned that “the risks surrounding the euro area growth outlook are considered to be broadly balanced”.However, he also used his infamous line “downside risks relating to predominantly global factors continue to exist.”

Overall, Draghi’s speech was as clear as ever.

The market’s reaction was fairly muted, with the EUR/USD touching a daily low before slightly recovering.