ECB 4 June Council Post-Meeting Assessment
· As expected, interest rates kept unchanged at 4 June meeting, leaving the ECB's 'refi' rate and deposit and marginal lending rates at 1.0%, 0.25% and 1.75% respectively.
· Staff June forecast sees sharp downward revision of real GDP in 2009 and resumption of growth now pushed out to mid-2010 but inflation outlook broadly unchanged, while risks to both remain 'balanced'
· Economic activity seen very weak in 2009Q1, remaining very subdued in rest of 2009 but recovering gradually in 2010, with risks to this 'broadly balanced'.
· Technical details of €60 bn covered bond purchase programme, with sterilised purchases on primary and secondary markets starting in July and to continuing to end-June 2010.
EZA Conclusion: interest rates now likely to stay on hold throughout the summer, and perhaps even up to the year-end, as the ECB assesses how effectively its successive 'unconventional' measures, and past rate cuts work their way through the monetary policy transmission mechanism.
© EZA
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