ECB to keep interest rates at zero till at least mid-2020
June 6, 2019

The European Central Bank says it will keep its key interest at the current level of zero, where it has been since March 2016, until at least the middle of next year. Its deposit rate also remains unchanged at minus 0.40 percent.

The ECB has also announced details for the third round of long-term commercial bank lending and from September 2019 to March 2021, it will provide two-year loans at particularly favorable terms with the aim of boosting lending, so driving economic growth and inflation.

Nick Chatters, Fixed Income Manager at asset manager Kames Capital, comments: "Following the latest ECB conference, I think that the market needs to continue to price an ECB policy response that implies some probability of a loosening in the future.

"Bunds at this level are fair value on a medium-term view, and with the expected policy path in the price we think moves are more likely to be driven by external factors such as US Federal Reserve policy or trade. The exception to the rule would be if the manufacturing weakness spills over into the rest of the economy, or employment and wages start to fall."

While the ECB is committed to keeping its key interest rate unchanged at zero, economic growth in the eurozone economy is beginning to pick up pace. Eurostat says that eurozone gross domestic product grew by 0.4 percent in the first three months of 2019, helped by consumer spending, gross fixed capital formation and foreign trade.

This compares to the 0.2 percent seen in the fourth quarter of last year. Compared to the first quarter of 2018, eurozone growth was 1.2 percent in the first quarter of 2019. Only Latvia saw a decline in the first three months, says Eurostat.





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The European Central Bank says it will keep its key interest at the current level of zero, where it has been since March 2016, until at least the middle of next year. Its deposit rate also remains unchanged at minus 0.40 percent.

The ECB has also announced details for the third round of long-term commercial bank lending and from September 2019 to March 2021, it will provide two-year loans at particularly favorable terms with the aim of boosting lending, so driving economic growth and inflation.

Nick Chatters, Fixed Income Manager at asset manager Kames Capital, comments: "Following the latest ECB conference, I think that the market needs to continue to price an ECB policy response that implies some probability of a loosening in the future.

"Bunds at this level are fair value on a medium-term view, and with the expected policy path in the price we think moves are more likely to be driven by external factors such as US Federal Reserve policy or trade. The exception to the rule would be if the manufacturing weakness spills over into the rest of the economy, or employment and wages start to fall."

While the ECB is committed to keeping its key interest rate unchanged at zero, economic growth in the eurozone economy is beginning to pick up pace. Eurostat says that eurozone gross domestic product grew by 0.4 percent in the first three months of 2019, helped by consumer spending, gross fixed capital formation and foreign trade.

This compares to the 0.2 percent seen in the fourth quarter of last year. Compared to the first quarter of 2018, eurozone growth was 1.2 percent in the first quarter of 2019. Only Latvia saw a decline in the first three months, says Eurostat.



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