Commenting on the ECB’s interest rate decision

Commenting on the ECB’s interest rate decision, Rupert Thompson, Head of Research at Kingswood, said: “The ECB left policy unchanged at today’s meeting and all but committed itself to easing at its meeting in September. Draghi emphasised that the risks of growth remain on the downside, inflation remains muted and the 2% inflation target is symmetric – implying that an overshoot would be tolerated to compensate for past undershooting. The news earlier this week of a further fall in manufacturing business confidence in the Eurozone can only increase the pressure for the ECB to ease. Options being considered include a cut in rates and a re-starting of its QE programme. The ECB has already updated its forward guidance to keeping rates at or below current levels through mid-2020. Exactly what the ECB ends up doing in September will most likely depend not only on whether the gloomy economic news continues but also on whether the Fed decides to cut rates by 25bp or 50bp next week.”