The European Central Bank (ECB) at the meeting of October 20 held its key tools of its monetary policy on the level of the last seven months. As reported on the website of the regulator, the base interest rate remained at the record low level — 0%, Deposit rate — at minus 0.4 percent, the rate on margin loans is 0.25%.
The regulator has kept the asset purchase programme of quantitative easing (QE) in the amount of €80 billion Program in the amount of €1.7 trillion will be valid until March 2017. If necessary, the expiration date may be extended, said the ECB.
According to the Wall Street Journal, investors are increasingly concerned about further ECB action. Many fear that after the use of the world’s Central banks unprecedented stimulus measures over many years their ability to maintain economic growth and inflation has been seriously weakened.
According to most analysts surveyed by Bloomberg, the regulator will extend the QE program at least six months. It will happen, probably at the meeting on 8 December. The share of analysts that are predicting the increase in quantitative easing programs has increased since the previous meeting of the regulator on 8 September, said the Agency. At the same time decreased the share of those who believe that the ECB in the short term will continue to cut rates, in connection with the intensification of market concerns about the negative impact of negative rates on the profitability of European banks.
“Given the adverse effects on banks, the ECB probably will not continue to cut rates. On the other hand, the “high probability” the extension of the QE program”, — quotes Agency a senior economist at Barclays Plc in Europe Philip gudina.
“Obviously, the ECB is facing a “fatigue of incentives,” — said in an interview with WSJ economist at BofA Merrill Lynch in London, Gilles the IOC.— The regulator is disappointed with the lack of support at the level of governments and probably concerned about the long-term consequences of the policy of ultra-low rates.”
Applying the policy of low interest rates and quantitative easing, the ECB is expected that these measures will help to increase lending and spur economic growth and inflation. However, economic growth in the Eurozone remains weak, while inflation significantly below the target level of 2%. In September it amounted to only 0.4%.