The European Central Bank announces its monetary policy decision for June 2018

  • Prior decision
  • Main refinancing rate 0.00%
  • Marginal lending facility 0.25%
  • Deposit facility -0.40%
  • Monthly asset purchases €30 billion
  • QE to end by the end of December
  • Asset purchases expected to be tapered to €15 billion from Oct to Dec
  • Decision on asset purchases still depends on incoming data
  • ECB to keep rates unchanged at least until summer of 2019
  • Rate outlook is tied to sustainable inflation path
  • ECB undertook a careful review of progress towards sustained adjustment in the path of inflation

Basically, they announced an end date which should be euro positive, but the caveat to the tapering is that it will still depend on incoming data. EUR/USD touched a high of 1.1851 on the release but is being sold off heavily now down to 1.1770.

The fact that they also said that rates will be kept unchanged until the summer means that we're not likely to see any further advancement in pricing of interest rate hikes and this is just about as good as it gets for ECB bulls in that case.

Buy the rumour, sell the fact play seems to be the name of the game. And I expect Draghi's presser later to continue with a dovish tone as he provides more details on how the central bank will go about exiting the programme - and what will they decide on if incoming data gets worse.

Full statement by the ECB:

"At today's meeting, which was held in Riga, the Governing Council of the ECB undertook a careful review of the progress towards a sustained adjustment in the path of inflation, also taking into account the latest Eurosystem staff macroeconomic projections, measures of price and wage pressures, and uncertainties surrounding the inflation outlook.

Based on this review the Governing Council made the following decisions:

First, as regards non-standard monetary policy measures, the Governing Council will continue to make net purchases under the asset purchase programme (APP) at the current monthly pace of €30 billion until the end of September 2018. The Governing Council anticipates that, after September 2018, subject to incoming data confirming the Governing Council's medium-term inflation outlook, the monthly pace of the net asset purchases will be reduced to €15 billion until the end of December 2018 and that net purchases will then end.

Second, the Governing Council intends to maintain its policy of reinvesting the principal payments from maturing securities purchased under the APP for an extended period of time after the end of the net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

Third, the Governing Council decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. 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 to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path.

Today's monetary policy decisions maintain the current ample degree of monetary accommodation that will ensure the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today."