Recent data push the ECB to act again

Summary

Unexpectedly, the ECB Governing Council (GC) decided to cut the main policy rate by 10bp to 0.05%, a historic low, at today’s monetary policy meeting. The GC also cut the deposit facility by 10bp to -0.20% and the marginal lending rate by 10bp to 0.30%, thus maintaining the symmetric corridor for interest rates. Moreover, the ECB decided to strengthen the package announced in June, as it will start buying asset-backed securities (ABS) and covered bonds next month. Mr. Draghi said that today´s decision was not unanimous, but he highlighted that a comfortable majority was in favour of the programme. The tone remained dovish, the easing bias was retained and unanimity in their commitment to use further unconventional instruments remains in place. The statement dropped a previous reference about medium-term inflation risks being “broadly balanced”, while stating that the GC continues to closely monitor risks to the outlook for inflation. Risks to the economic outlook continue on the downside.

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