European Central Bank decides to keep expanding money base

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

Mario Draghi kept the European Central Bank's discussion away from the future path of monetary policy on Thursday despite a plea to the contrary, according to euro area officials familiar with the matter.

Amid trade tensions across the globe and signs of a slowdown in the eurozone, most economists expect the European Central Bank to keep rates on hold.

The bank also confirmed that the net asset purchases, at the current monthly pace of Euro 30 billion, will run until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

The ECB was approaching the coming month with "prudence, patience and persistence", said Draghi, with the bank also indicating that it was in no rush to begin increasing borrowing costs.

Draghi told his press conference that the ECB was "cautious, tempered by unchanged optimism", that the strength of the eurozone economy will allow the bank to reach its inflation target. The stimulus is set to run at least through September.

Business sentiment has already taken a hit, particularly in export-focused Germany, and a full-fledged trade war could quickly hurt growth - a risk already highlighted by policymakers at the ECB's March meeting.

More news: Malaysia Releases Photo Of Suspect In Palestinian's Killing

If growth slows significantly, the central bank could face pressure to extend its 30 billion euros ($36 billion) in bond purchases.

Their 2018 growth forecasts were unchanged at 2.3 percent, but most economists polled said the trade dispute between the United States and China would also damage the euro zone economy.

Interest rates will be on hold until well past the horizon of net asset purchases, which likely implies a hike in September 2019 at the earliest, the economist added.

A key worry is that protectionist rhetoric from the United States could push down the value of the dollar even as the Federal Reserve is likely to raise interest rates several times this year, to support the USA currency.

Euro zone inflation is so weak that even after the creation of 9 million jobs since early 2013, measures of underlying price growth that strip out energy and food are barely rising. The marginal lending facility rate is 0.25 percent.

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