European Central Bank leaves key rates on hold as expected

European Central Bank leaves interest rate unchanged, despite slowing of EU economic growth

The Latest: ECB keeps rates on hold amid mixed economic data

Growth in the eurozone is solid and widespread, European Central Bank President Mario Draghi said Thursday.

Interest rates on the main refinancing operations were unchanged at 0.00 percent, according to a statement from the ECB's Governing Council.

"Regarding non-standard monetary policy measures, we confirm that our net asset purchases, at the current monthly pace of €30 billion, are meant to run until the end of September 2018, or beyond, if necessary", he said.

"But we expect President Draghi to hint at the press conference that a gradual normalization is still to come".

Mario Draghi said Thursday that recent data points to "some moderation" in the economic growth in the 19 countries that use the euro, while still remaining "consistent with a broad-based expansion".

Draghi dismissed the slow-down as of little effect to the broader themes of regional growth and convergence with more normal levels of inflation in the medium-term - at or just below the ECB's target of 2.0%.

Mr Draghi said risks surrounding the euro area growth outlook remained broadly balanced but that "risks related to global factors, including the threat of increased protectionism, have become more prominent". The marginal lending facility rate is 0.25 percent.

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Indeed it may be traders were reacting to the insight that the only "certainty" was that nothing is certain in relation to ending the ECB's stimulus programme (QE).

"The underlying strength of the euro area economy continues to support our confidence that inflation will converge toward our inflation aim of below, but close to, 2 per cent over the medium term".

Draghi said: 'The interesting thing is that we didn't discuss monetary policy per se. But with the risk of a global trade war still looming, it may not make a decision until absolutely necessary. That rate is minus 0.4 percent, meaning banks pay a penalty on the funds they deposit.

Even if the single currency's rise has petered out for now, exporters like Continental and Volkswagen flagged the exchange rate as a risk. This, in turn, could have ramifications for the ECB's sole policy objective of ensuring price growth returns to its near 2 percent target.

A stronger euro would cap inflation, but would affect growth and exports. Years of stimulus have sent stock and bond markets higher and central bankers are at pains to move carefully as they halt or withdraw stimulus to avoid market turbulence.

Even if the currency impact were to bite, the European Central Bank has little scope to extend purchases much longer, suggesting it will take an extremely cautious approach to normalising policy, even if it risks erring on the side of caution and moving too late.

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