European Central Bank holds interest rates steady

Stocks up as markets steel themselves for tariff decision

Euro jumps as ECB hints at the end of quantitative easing

The ECB will reinvest the principal repayments of maturing securities acquired under the asset purchase program for a prolonged period after the net asset purchase has ended and in any case as long as necessary.

However, at the last communication of the European Central Bank is missing one sentence, which has so far been present in the announcement of monetary policy decisions, that under less favorable prospects (including inflation) the Governing Council will be ready to increase the size and/or duration of the asset purchase program. The central bank promises to keep interest rates stable until it stops buying assets.

Draghi cautioned that the "rising protectionism" could harm growth in the eurozone. "It also mostly shut down expectations by some that early 2019 rate hikes were in the cards". During this time the euro has gained 17.5% against the U.S. currency. And at this stage in the economic cycle, growth can become fragile very quickly.

And this leaves aside US President Donald Trump's decision to levy stiff steel and aluminum tariffs.

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During the subsequent European Central Bank press conference, Draghi was able to tone down any hawkishness in the statement in his responses to questions from the assembled group of journalists.

ECB President Mario Draghi played down the change today. But he said such disputes should be worked out among trade partners, not decided by measures initiated from one side.

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Wall Street stocks were also higher in late morning trade, with the Dow up 0.2%.

"Our view that the Bank will not tighten policy anytime soon is increasingly shared by the analyst consensus: More than 60% of analysts polled by Reuters expect the Bank to leave policy settings unchanged this year".

Vistesen at Pantheon added: "Draghi stuck to the main dovish elements of the ECB's communication strategy: underlying inflation remains subdued and ample monetary policy stimulus is still needed to bring inflation back to target".

While ECB inflation projections have consumer prices hovering around the 1.5% inflation rate by the end of 2018 and rising gradually over the medium term, Draghi told reporters that underlying inflation measures will remain subdued - so "victory can not be declared yet".

On the currency markets the dovish message won out.

Shortly after the announcement of the bank's decision, the Euro appreciated by 0.06% to 1.2419 United States dollars. Against the pound, the euro was 0.13% lower at £0.8916 and fell 0.65% to Y130.81 versus Japan's yen.

Another step at its latest council meeting means that the ECB's key interest rate - and thus in rates charged to Irish borrowers - may start to increase in 2019, with implications for households, businesses and the exchequer. The EURO STOXX 50 closed 1.1% up at 3,415.74 points.

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