On Friday the U.S. dollar rose to the highest level since early March against the euro following the ECB’s monetary policy meeting on Thursday that confirmed the European Central Bank has maintained its current interest rate and left open the possibility for more stimulus in the future.
The ECB kept its interest rate and overnight deposit facility unchanged at 0.00 percent, 0.25 percent and -0.40 percent and left intact its monthly asset purchases of €80 billion that runs until the end of March 2017, or beyond, if necessary.
ECB President Mario Draghi said they expect the current interest rates to remain at present or lower levels for an extended period of time, and “well past the horizon of our net asset purchases.”
Draghi admitted since their last policy meeting in early September the data confirms a continued moderate but steady recovery of the euro area economy and a gradual rise in inflation, in line with their previous expectations.
Draghi said the ECB will continue to act, if warranted, by using all the instruments available within their mandate.
Draghi explained that real GDP in the euro area increased only 0.3 percent, quarter on quarter, during the second quarter of 2016, after rising 0.5 percent in the first quarter while euro area HICP inflation rose just 0.4 percent in September, up from 0.2 percent in August.
Although there was an increase in inflation in September, Draghi said this reflected mainly a continued increase in annual energy inflation but noted “there are no signs yet of a convincing upward trend in underlying inflation.”
Draghi said that based on the current oil futures prices, inflation prices are “likely to pick up” over the next couple of months.
During the press conference, Draghi was questioned about inflation and the ECB’s QE program beyond March 2017.
Draghi spoke about the need to see a “self-sustained convergence” without the extraordinary policy support that is in place now.
Draghi said that he wants the ECB’s objective to be achieved in a “sustained and durable way.”
During the ECB’s December policy meeting, economic projections will be updated.