The ECB cut the main refi rate by -25 bps to another record low of 0.25% while the marginal lending facility rate is down to 0.75% from 1%. Yet, the deposit rate stays unchanged at 0%. The rate cut was triggered by the weaker-than-expected inflation in October. President Draghi pledged to extend its unlimited offerings of 1-month and 3-month cash until mid-2015.The euro slumped after the announcement. The BOE left the policy rate and the asset purchase program unchanged.
Eurozone's annual HICP inflation moderated to +0.7% in October from +1.1% in September. The decline came in more severe than expected and evidenced "lower food price inflation, a larger fall in energy prices and some weakening in services price inflation". As mentioned in the statement, the rate cut was driven by the indications of "further diminishing underlying price pressures in the Euro area over the medium term, starting from currently low annual inflation rates of below 1%". At the press conference, President Darghi warned that the Eurozone may "experience a prolonged period of low inflation". The ECB reiterated to maintain its target of keeping inflation rates below, but close to, 2% in the medium- to long-term.
Besides, the rate cut, the ECB would continue the fixed-rate main refinancing operations (MROs) with full allotment for as long as necessary (at least until the end of July 7, 2015). The special-term refinancing operations with a maturity of one maintenance period will also continue, at a rate same as that of the MRO rate, at least until 2Q15. Meanwhile, the 3-month LTROs will be allotted until the end of the 2Q15 as fixed rate tender procedures with full allotment. Concerning the monetary outlook, Draghi affirmed that the central bank would "continue to monitor closely money market conditions and their potential impact on our monetary policy stance" and it is "ready to consider all available instruments".
In the UK, the BOE expectedly left the Bank rate unchanged at 0.5% and the asset purchase program at 375B pound. The next focus is the release of economic projection report due November 13 and the minutes for the November meeting a week after.
Eurozone's annual HICP inflation moderated to +0.7% in October from +1.1% in September. The decline came in more severe than expected and evidenced "lower food price inflation, a larger fall in energy prices and some weakening in services price inflation". As mentioned in the statement, the rate cut was driven by the indications of "further diminishing underlying price pressures in the Euro area over the medium term, starting from currently low annual inflation rates of below 1%". At the press conference, President Darghi warned that the Eurozone may "experience a prolonged period of low inflation". The ECB reiterated to maintain its target of keeping inflation rates below, but close to, 2% in the medium- to long-term.
Besides, the rate cut, the ECB would continue the fixed-rate main refinancing operations (MROs) with full allotment for as long as necessary (at least until the end of July 7, 2015). The special-term refinancing operations with a maturity of one maintenance period will also continue, at a rate same as that of the MRO rate, at least until 2Q15. Meanwhile, the 3-month LTROs will be allotted until the end of the 2Q15 as fixed rate tender procedures with full allotment. Concerning the monetary outlook, Draghi affirmed that the central bank would "continue to monitor closely money market conditions and their potential impact on our monetary policy stance" and it is "ready to consider all available instruments".
In the UK, the BOE expectedly left the Bank rate unchanged at 0.5% and the asset purchase program at 375B pound. The next focus is the release of economic projection report due November 13 and the minutes for the November meeting a week after.
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