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Mario Draghi, President of the European Central Bank (ECB), speaks at a press conference following a plenary session of the International Monetary Fund Committee (IMFC) at the Spring Meetings of the International Monetary Fund (IMF) and the World Bank in Washington, United States, Saturday, April 13, 2019.
Joshua Roberts | Bloomberg | Getty Images
The euro hit a higher sitting level against the US dollar on Thursday after the European Central Bank (ECB) announced that it would postpone its first interest rate hike after the crisis to the US dollar. less in the middle of next year.
ECB President Mario Draghi also proposed paying the banks if they borrowed cash from the central bank and turned it over to households and businesses.
Trade tensions and fears of a global recession have upset markets this week. Market participants are increasingly hopeful that ECB President Mario Draghi could signal a late increase in monetary support before the end of his term in October.
The central bank said the interest rates on its marginal lending facility and deposit facility would remain unchanged at 0 percent, 0.25 percent and -0.40 percent, respectively. These reached record levels after the euro sovereign debt crisis in 2011 with the aim of boosting inflation and boosting growth.
In a surprise revision of its forecasts, the ECB said in a statement that the Governing Council "is now expecting the key rates of the ECB to remain at their current levels for at least the first half of 2020" .
The euro climbed 0.4% to hit a sitting high of $ 1.1256 shortly after the announcement.
Investors should closely follow the comments of the Draghi press conference at 13:30. London time. It is also expected to release new economic forecasts for staff, which could post weaker growth next year.
ECB policymakers met this week in Vilnius, Lithuania, to review up-to-date forecasts and declining inflation expectations.
This comes at a time when the mood has changed among some of its global peers. The Australian central bank lowered interest rates for the first time in three years on Tuesday, as the US Federal Reserve recently announced its intention to relax if necessary.
At the same time, the Indian central bank lowered its benchmark interest rate for the third time this year on Thursday and there is growing expectation that the Bank of Japan will also provide additional stimulus .
In April, Draghi said ECB policymakers would review how monetary policy works when setting the terms for its new low-cost loan program for banks – TLTROs (longer-term refinancing operations).
These loans should essentially encourage euro area banks to lend more to the real economy. They have a negative deposit rate and therefore pay the lenders for taking the money, which is a strong incentive for banks to use them.
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