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Updated: ECB Waiting For Early 2015 Before Deciding Future Of QE

By Kitco News
Thursday December 4, 2014 8:50 AM

Editor's Note: The article was updated to include more comments from the press conference.

(Kitco News) - As expected, the European Central Bank will wait until early 2015 to decide whether or not to expand its quantitative-easing measures.

The statement comes after the ECB said it would leave the main refinancing operation at 0.05%. Its marginal lending facility rate stands at 0.30% and its deposit facility remains at negative 0.20%.

During his monthly press conference, ECB President Mario Draghi said although inflation is expected to continue to weaken, the governing council decided to hold off on further measures until they have gauged the impact of the recent asset-backed purchases and the impact on lower oil prices.

Image courtesy of the ECB: ECB President Mario Draghi

“Early next year we'll reassess monetary stimulus achieved, the expansion of the balance sheet and the outlook for price developments,” he said.

However, he reiterated that the council is "unanimous in its commitment to using additional unconventional instruments within its mandate." He added that ECB staff has stepped up preparations for further measures and any new initiatives could be implemented in a “timely manner.”

During the question and answer period, Draghi said that it would only take a simple majority vote to implement new asset purchases and not a majority. He added that the council will do what it is necessary, to follow its inflation target mandate.

“We won’t tolerate prolonged deviation from our inflation mandate that could lead to unintentional monetary tightening,” he said.

During the press conference, Draghi would not comment about when the council will make its decision; however he said that it won't be at the next meeting.

"Early next year means early next year," he said. "We have a lot of facts to exam."

One fact that Draghi said they will be watching closely will be the impact of lower oil prices, which he added are "unambiguously positive."

In his introductory statement, Draghi presented the ECB's latest economic projects, which he said were revised “substantially” lower. For 2014 the central bank expects the Eurozone economy to grow by 0.8%, down from September’s projected 0.9% growth; the economy is now expected to grow by 1.0%, down from the previous forecast of 1.6% and 2016 is expected to see growth of 1.5%, lower than the previous forecast of 1.9%.

“The risks surrounding the economic outlook for the euro area are on the downside. In particular, the weak euro area growth momentum, alongside high geopolitical risks, has the potential to dampen confidence and especially private investment,” he said in his statement.

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By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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