11 Jul 2013
ECB Monthly Report: Interest Rates could be reduced further
FXstreet.com (Barcelona) - The ECB signalized in its July Monthly Report that interest rates could be reduced further, should the price stability outlook warrant it. The recently introduced forward guidance was also included: “The Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time.”
There was also some clarification of its time horizon: “The extended period of time over which the Governing Council currently expects the key ECB interest ratesto remain at present or lower levels is a flexible horizon which does not pre-specify an end-date but is conditional on the Governing Council’s assessment of the economic fundamentals that determine underlying inflation.
Furthermore, the Council pointed to recent improvements in Eurozone sentiment indicators which suggest a gradual recovery of the economy later this year and in 2014. To support it, the ECB is prepared to maintain the accomodative monetary policy for as long as necessary.
The accomodative policy should prop up domestic demand while the recovery in global demand should boost export growth in the area. Additionally, the Governing Council suggested that “the overall improvements in financial markets seen since last summer should work their way through to the real economy, as should the progress made in fiscal consolidation.”
There was also some clarification of its time horizon: “The extended period of time over which the Governing Council currently expects the key ECB interest ratesto remain at present or lower levels is a flexible horizon which does not pre-specify an end-date but is conditional on the Governing Council’s assessment of the economic fundamentals that determine underlying inflation.
Furthermore, the Council pointed to recent improvements in Eurozone sentiment indicators which suggest a gradual recovery of the economy later this year and in 2014. To support it, the ECB is prepared to maintain the accomodative monetary policy for as long as necessary.
The accomodative policy should prop up domestic demand while the recovery in global demand should boost export growth in the area. Additionally, the Governing Council suggested that “the overall improvements in financial markets seen since last summer should work their way through to the real economy, as should the progress made in fiscal consolidation.”