ECB Leaves Rates on Hold, Raises ELA For Greece

The ECB left its benchmark refinancing rate unchanged at a record low 0.05% and the asset purchase program on hold on July 16th as widely expected. The ECB also decided to raise the emergency liquidity assistance to Greek banks by €900 million over 1 week.
ECB | Joana Taborda | 7/16/2015 3:10:16 PM
The ECB was expected to leave the Emergency Liquidity Assistance (ELA) to Greek banks unchanged at €89 billion but Greek Parliament had voted to accept the terms of its bailout and Euro Area members approved short-term funding, President Draghi said at the press conference.

Extracts from Introductory statement to the press conference by Mario Draghi, President of the ECB:

Regarding non-standard monetary policy measures, the asset purchase programmes continue to proceed smoothly. As explained on previous occasions, our monthly asset purchases of €60 billion are intended to run until the end of September 2016 and, in any case, until we see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term. When carrying out its assessment, the Governing Council will follow its monetary policy strategy and concentrate on trends in inflation and the medium-term outlook for price stability.

All in all, the information that has become available since the Governing Council meeting in early June has been broadly in line with our expectations. Recent developments in financial markets, which partly reflect greater uncertainty, have not changed the Governing Council’s assessment of a broadening of the euro area’s economic recovery and a gradual increase in inflation rates over the coming years. The ECB’s monetary policy stance remains accommodative and market-based inflation expectations have, on balance, stabilised or recovered further since our meeting in early June. The latest information also remains consistent with a continued pass-through of our monetary policy measures to the cost and availability of credit for firms and households. Our measures thereby continue to contribute to economic growth, a reduction in economic slack, and money and credit expansion. The full implementation of all our monetary policy measures will lead to a sustained return of inflation rates towards levels below, but close to, 2% in the medium term, and will underpin the firm anchoring of medium to long-term inflation expectations.

Looking ahead, we expect the economic recovery to broaden further. Domestic demand should be further supported by our monetary policy measures and their favourable impact on financial conditions, as well as by the progress made with fiscal consolidation and structural reforms. Moreover, the recent decline in oil prices should provide additional support for households’ real disposable income and corporate profitability and, therefore, private consumption and investment. Furthermore, demand for euro area exports should benefit from improvements in price competitiveness. However, the ongoing slowdown in emerging market economies continues to weigh on the global outlook and economic growth in the euro area is likely to continue to be dampened by the necessary balance sheet adjustments in a number of sectors and the sluggish pace of implementation of structural reforms.

The downside risks surrounding the economic outlook for the euro area have generally been contained as a result of our monetary policy decisions, as well as oil price and exchange rate developments.

Supported by the expected economic recovery, the impact of the lower euro exchange rate and the assumption embedded in oil futures markets of somewhat higher oil prices in the years ahead, inflation rates are expected to pick up further during 2016 and 2017.

The interest rates on the marginal lending facility and the deposit facility were also left on hold at 0.30 percent and -0.20 percent respectively.

ECB Leaves Rates on Hold, Raises ELA For Greece